Massachusetts Lawyer Blog

A reader here of the Massachusetts Lawyer Blog recently emailed me with a Title V real estate tax credit question. Below are excerpts from our exchange and some links to additional resources at the bottom of the page.

Email Question:

I read your blog about MA Septic replacement credit and am looking for clarification on one issue. We are selling our house, and replaced the septic system due to a failed title V. We spent approximately $15k on the system. I understand that 40% can be recouped. However, my wife and I are moving out of state after the property is sold, and will no longer be MA residents. Will we be able to continue to receive the $1500/year credit even if we are non-residents?

Generally speaking (assuming you meet the criteria for the credit...), former Massachusetts residents who are required to file Massachusetts nonresident returns may claim their unused prior year credit carryovers. A part-year resident qualifies for the full credit if the property is an owner occupied principal residence. When the credit exceeds the tax due, the excess credit may be carried forward for up to five succeeding tax years. So, in the event you return to MA, are required to file a MA nonresident return, or if you are in MA for an additional partial taxable year, you may be in luck, but probably not otherwise. Of course this is just a general assessment and shouldn't be relied upon for tax or legal advice. For more information about the tax credit, you may want to contact the Massachusetts Department of Revenue at 1-800-392-6089.

…

In order to qualify for the credit:

1. the amount of credit cannot exceed $6,000. The computation of the credit is 40 percent (.40) of available actual costs, not to exceed $15,000 ($15,000 x .40 = $6,000);
2. the maximum amount of the computed credit claimed in any tax year cannot exceed $1,500;
3. in the computation of the credit, any interest subsidy received from the Commonwealth must be subtracted;
4. the credit may be claimed beginning in the tax year in which the repair or replacement work is completed; and
5. the owner completes Massachusetts Schedule SC and retains it for his or her records along with the Certificate of Compliance.

Carryover of the Credit:
If the credit exceeds the tax due, the excess credit may be carried forward for up to five succeeding tax years.

Nonresidents do not qualify for this credit since the property must be an owner occupied principal residence located in Massachusetts. However, former Massachusetts residents who are required to file Massachusetts nonresident returns may claim their unused prior year credit carryovers.

Part-year residents qualify for the full credit if the property is an owner occupied principal residence.

See Part II next.