Massachusetts Tax Changes in 2025: What You Need to Know
In 2025, significant changes to Massachusetts tax laws will take effect, including the full implementation of an expanded tax credit signed into law in 2023 by Governor Maura Healey.
Enhanced Child and Family Tax Credit
Part of a $1 billion tax reform package, the Child and Family Tax Credit is now one of the most generous in the nation. Key changes include:
- Credit Increase: For the 2023 tax year, the credit rose from $180 to $310 per dependent. For 2024 and beyond, it increases further to $440 per dependent.
- No Cap on Dependents: Previously, families could only claim credits for up to two dependents. Now, there’s no limit. For instance, a family with four dependents can claim $1,760 for the 2024 tax year—up from just $360 before the reform.
This change is expected to benefit an estimated 565,000 families across the state.
Corporate Tax Calculation Overhaul
Starting in 2025, Massachusetts will adopt the single sales factor method for calculating corporate taxes. Previously, taxes were determined using a combination of a company’s local employment numbers, property holdings, and in-state sales. Under the new system, only in-state sales will be considered.
This shift benefits companies with substantial in-state operations, including:
- Massachusetts-based businesses: State Street, TripAdvisor, and Dunkin’.
- Companies with major offices in the state: BNY Mellon and Citizens Bank.
Massachusetts joins several other New England states already using this simplified approach, which aims to encourage economic growth and attract businesses.
These updates reflect the state’s commitment to supporting families and fostering a competitive business environment.