PERSONAL EXEMPTIONS

An Overview

Massachusetts Association of Assessing Officers June 22, 2020

Kathleen Colleary, Esq.

This presentation represents the opinions of the presenter and is for informational and training purposes only.

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PERSONAL EXEMPTION OVERVIEW

AGENDA 1. Review general administration of personal exemptions 2. Review recent changes in personal exemptions 3. Review personal exemption local options 4. Review eligibility requirements for personal exemptions

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RECENT LEGISLATION PERSONAL EXEMPTIONS • Prisoners of War – Beginning in FY2020, the Clause 22A exemption also applies to prisoners of war. St. 2018, c. 218, §§ 12 and

13 (An Act Relative to Veteran’s Benefits, Rights, Appreciation, Validation and Enforcement -BRAVE Act). • Surviving Parents and Guardians – In a city or town that accepts a new Clause 22H, the surviving parents and guardians of

active duty military personnel (including National guardsmen on active duty) who went missing in action and are presumed to have died and active duty military personnel (including National guardsmen on active duty) and veterans who died as a proximate result of injuries sustained or diseases during active duty will be entitled to a full exemption from taxation on their domiciles. The surviving parent or guardian must have lived in Massachusetts for at least 5 years before the tax year begins (or the deceased service member or veteran had to have been domiciled in Massachusetts for at least 6 months before entering military service). The first year the exemption can apply is FY2020, regardless of when the service member or veteran died. The exemption applies until the parent or guardian dies. St. 2018, c.218, § 15 (BRAVE Act).

• Veteran Residency Requirement – Beginning in FY2020, a veteran seeking exemption under Clauses 22, 22A, 22B, 22C, 22E

and 22F and a surviving spouse seeking exemption under Clause 22D must have been domiciled in Massachusetts for at least 2 rather than 5 years before the tax year begins, unless the veteran or service member had been domiciled in the state for 6 months before entering the service. St. 2018, c. 218, §§ 11 and 14 (BRAVE Act). The local acceptance option to further reduce the residency requirement Clauses 22, 22A, 22B, 22C, 22D, 22E and 22F to 1 year remains. Note that option does not apply to the new local acceptance Clause 22H.

• Veterans Spouses and Surviving Spouses –A local acceptance exemption, Clause 22G, treats persons otherwise eligible for a

Clause 22, 22A, 22B, 22C, 22D, 22E and 22F exemption as the owner of the domicile when legal title is held by a trustee, conservator or other fiduciary for the person’s benefit. St. 2018, c.218, § 15 (BRAVE Act). Clause 22G, as originally enacted in 2016, provided that a veteran’s spouse who holds title to the veteran’s domicile as a trustee or conservator and a veteran’s surviving spouse who acquired title to the deceased veteran’s domicile under a trust or conservatorship, were eligible for any available veteran exemption. St. 2016, c. 218, §§ 116 and 121 (An Act to Modernize Municipal Finance and Government - Municipal Modernization Act). However, they were already eligible. The BRAVE Act clarified the language consistent with a technical amendment filed by the Governor in a supplemental budget early in 2018 so it now reflects the intended purpose. A city or town that has already accepted Clause 22G does not need to take any further action for the amended language to apply. Note that option does not apply to the new local acceptance Clause 22H.

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• Blind Veterans - Beginning in FY2018, the Clause 22F exemption also applies to veterans who have 100% disability ratings for service-connected blindness, their spouses (if they hold title to the domicile) and their surviving spouses. St. 2016, c. 141, § 10 (An Act Relative to Housing, Operations, Military Service and Enrichment - HOME Act). The full exemption from real estate taxes assessed on the domiciles of paraplegics, their spouses where title held by spouse and their surviving spouses began being granted locally under the new Clause 22F beginning in FY2016. St. 2014, c. 62, §§ 9-13 (An Act Relative to Veterans' Allowances, Labor, Outreach and Recognition -VALOR II Act). See Division of Local Services (DLS) Informational Guideline Release (IGR) 17-19, Property Tax Exemption for Paraplegic and Blind Veterans (July).

• Clause 22D Surviving Spouses – Beginning in FY2018, the Clause 22D exemption expressly applies to surviving spouses of

veterans whose service-connected injury or disease is the proximate cause of death. The service connected injury or disease will no longer need to have been sustained in a combat zone. The United States Department of Veterans Administration (VA) or branch of service decision on the proximate cause of death will be determinative of that eligibility factor. A 2006 provision that appeared to limit eligibility to the surviving spouses of active duty personnel who died in post September 11, 2001 military engagements has also been repealed. St. 2016, c. 141, §§ 9 and 25 (HOME Act). The amended exemption applies regardless of when the service member or veteran died, but only for FY2018 and subsequent fiscal years. See DLS IGR 17-18, Property Tax Exemption for Surviving Spouses of Active Duty Personnel and Veterans (July).

• Optional Additional Exemption – Beginning in FY2016, the optional additional exemption of up to 100% for personal

exemptions is granted under a new local acceptance statute, G.L. c. 59, § 5C½, applies to all partial exemption clauses listed in the first paragraph of G.L. c. 59, § 5, and after acceptance, the exemption percentage voted before the beginning of the fiscal year in which that percentage is first implemented applies until another percentage voted before the beginning of a later fiscal year will first apply. St. 2014, c. 62, §§ 14 and 27 (VALOR II Act). See DLS IGR 15-210, Optional Additional Real Estate Exemption (March).

• Exemption Applications - Beginning in FY2017, April 1 is the deadline to apply for personal exemptions and deferrals from real

estate taxes (or three months after the bills are mailed if mailed after January 1. G.L. c. 59, § 59. This applies to the personal exemptions and deferrals under G.L. c. 59, § 5, Clauses 17 (or local option 17C, 17C½, 17 D), 18, 18A, 22, 22A, 22B, 22C, 22D, 22E, 22F, 37 (or local option 37A), 41 (or local option 41B, 41C, 41C½), 41A, 42, 43, and local option 52, 53, 56 and 57. The April 1 deadline also applies to applications for residential exemptions and small commercial exemptions granted as part of a community’s property tax classification options when the exemptions do not appear on the actual tax bill and applications for exemption of Community Preservation and Municipal Water Infrastructure surcharges. In addition, applications for abatement and exemption of Community Preservation surcharges will be confidential, and taxpayers may appeal the assessors’ denial of their applications to the Appellate Tax Board, in the same manner as denied property tax abatement and exemption applications. St. 2016, c. 218, §§ 100, 119, 122, 125, 126, 146, and 247 (Municipal Modernization Act). Note G.L. c. 59, § 59 was not amended to include the new local acceptance Clause 22H. The deadline for those applications will be the abatement application due date.

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WORK ABATEMENTS • Senior Work Abatement - Maximum abatement seniors in cities and towns that have accepted the senior work-off abatement

statute, G.L. c. 59, § 5K, may earn is $1,500. St. 2016, c. 218, § 127 (Municipal Modernization Act). Previously, the limit was $1,000. By vote of the legislative body, the maximum abatement may be based on 125 hours of voluntary service, if higher.

• Veteran Work Abatement - Maximum abatement veterans in cities and towns that have accepted the veteran work-off abatement

statute, G.L. c. 59, § 5N, may earn is $1,500. St. 2018, c. 218, § 17 (BRAVE Act). Previously, the limit was $1,000. By vote of the legislative body, the maximum abatement may be based on 125 hours of voluntary service, if higher.

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TABLE 1. Local Option Personal Exemption Statutes1 (Table from DLS Course 101 Handbook, Chapter 7) Require Acceptance/Action by Legislative Body

Citation Exemption Type Effect

G.L. c. 59 § 5, Clause 17C, 17C½, 17D Senior, Surviving Spouse, Minor Child of Deceased Parent

Supersedes Cl. 17, or previously accepted version Increases whole estate limit

G.L. c. 59 § 5, Clause 17E Senior, Surviving Spouse, Minor Child of Deceased Parent

Increases whole estate limit automatically each year by COLA determined by DOR

G.L. c. 59 § 5,Clause 17F [Codified as Clause 17F - BRAVE Act]

Senior, Surviving Spouse, Minor Child of Deceased Parent

Increases exemption amount annually by any % up to COLA determined by DOR Legislative body must also vote to fix % increase

G.L. c. 59, § 5, Clause 18A Hardship deferral Legislative body may vote to reduce interest below 8%

G.L. c. 59, § 5, provision added by St. 1993, c. 110, §110 (now last paragraph of c. 59, § 5, Clause 22H – BRAVE Act)

Veteran Reduces residency requirement for veterans who were not domiciled in Massachusetts 6 months before entering the service to 1 year before application - Applies to veteran exemptions Clauses 22, 22A-22F, but not Clause 22H

G.L. c. 59, § 5, Clause 22G Veteran Exempts persons otherwise eligible for a Clause 22, 22A, 22B, 22C, 22D, 22E or 22F when legal title is held by a trustee, conservator or other fiduciary for the person’s benefit [NEW- FY2018 - Municipal Modernization Act; CLARIFIED – FY2020 – BRAVE Act]

G.L. c. 59, § 5, Clause 22H Veteran Exempts surviving parents or guardians of active duty military personnel (including National guardsmen on active duty) or veterans who (1) died as a proximate result of injuries sustained or diseases during active duty, or (2) went missing in action and are presumed to have died. [NEW- FY2020 - BRAVE Act]

G.L. c. 59, § 5, Clause 37A Blind person Supersedes Cl. 37 Increases amount of exemption to $500

G.L. c. 59, § 5, Clause 41A Senior deferral Legislative body may vote to: • Increase gross receipts limit up to income single seniors who are not heads of households may have to

qualify for the “circuit breaker” state income tax credit • Reduce interest below 8%

G.L. c. 59, § 5, Clause 41B, 41C Senior Supersedes Cl. 41, or previously accepted version Increases gross receipts and whole estate limits

G.L. c. 59, § 5, Clause 41C Senior Legislative body may vote to: • Reduce eligibility age to 65 • Increase exemption amount by up to 100% • Increase gross receipts limit up to $20,000 single and $30,000 married • Increase whole estate limit up to $40,000 single and $55,000 married • Exclude value of up to 4 family home from whole estate

1 If a local option statue has been accepted, no additional local acceptance is necessary to implement any later changes in the law. Acceptance of a local option statute is also acceptance of any amendments unless the legislation expressly provides otherwise and requires some other action.

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Citation Exemption Type Effect

G.L. c. 59, § 5, Clause 41C½ Senior Legislative body may vote to: • Reduce eligibility age to 65 • Increase exemption % up to 20% • Reduce durational residency requirement to 5 years • Adjust income limits to apply to combined household income

G.L. c. 59, § 5, Clause 41D Senior Increases Clause 41, 41B or 41C gross receipts and whole estate limits automatically each year by COLA determined by DOR

G.L. c. 59, § 5, Clause 50 Senior Exempts value of improvements to residential property made to provide housing for person 60 or older who is not the owner

G.L. c. 59, § 5, Clause 52 Senior Exempts amount of taxes that exceed higher water/sewer bills up to $200 (only in community adopting water/debt shift under G.L. c. 59, § 21C(n))

G.L. c. 59, § 5, Clause 53 Residential Exempts amount of taxes that exceed higher sewer bills up to $300 for homeowners not connected to sewer system (only in community adopting sewer debt shift under G.L. c. 59, § 21C(n))

G.L. c. 59, § 5, Clause 55 Personal Makes units leased to and occupied by members of cooperatives deemed owned by members

G.L. c. 59, § 5, Clause 56 Deployed Guardsmen & Reservists

Exempts up to 100% of property taxes assessed to Massachusetts national guardsmen and reservists deployed overseas

G.L. c. 59, § 5, Clause 57 Senior Exempts seniors up to amount of “circuit breaker” state income tax credit received for domicile

G.L. c. 59, § 5C Residential Makes units leased to and occupied by members of cooperatives deemed owned by members

G.L. c. 59, § 5C½ Personal Increases all personal exemption amounts by up to percentage (not to exceed 100%) voted by legislative body before the July 1 of the fiscal year the percentage first applies

TABLE 2. Local Option Personal Exemption Statutes2 (Table from DLS Course 101 Handbook, Chapter 7) Require Acceptance by Voter Approval of Ballot Question

Citation Exemption Type Effect

G.L. c. 59, § 5, Clause 41C½ Senior Supersedes Cl. 41, or previously accepted version Bases exemption on 5% of average residential value Increases gross receipts limit – tied to state senior circuit breaker limits which increase yearly Eliminates whole estate limit

2 If a local option statue has been accepted, no additional local acceptance is necessary to implement any later changes in the law. Acceptance of a local option statute is also acceptance of any amendments unless the legislation expressly provides otherwise and requires some other action.

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ELIGIBILITY REQUIREMENTS Generally see Section 3 of Chapter 7, Property Tax Exemptions, of the DLS Assessors Course 101 Handbook for information on personal exemptions. Also see the DLS Fact Sheets designed for distribution to taxpayers about exemptions for seniors, blind persons, disabled veterans, surviving spouses and minor children with deceased parent. APPLICANTS MUST OWN THE PROPERTY • What is a sufficient interest in the property for an applicant to be an owner? • Who is the owner if a life estate exists? • Who owns the property if it is part of the assets of a trust? See Sections 4 and 5 of Chapter 1, Assessment Administration, of the DLS Assessors Course 101 Handbook for further information on property interests and ownership forms APPLICANTS MUST OCCUPY THE PROPERTY AS THEIR DOMICILE • What is the difference between domicile and residence? • Can spouses have separate domiciles? • Does a person confined to a nursing home occupy the property? • What property is considered to be the domicile? APPLICANTS MUST MEET STATUS REQUIREMENTS • How is legal blindness established? • What does hardship mean? • Who is a surviving spouse? An ex-spouse? An ex-spouse who remarries and whose new marriage has ended due to divorce or death? • Who is a veteran? • Who else may apply based on their relationship to a veteran or an active duty service member? APPLICANTS MAY NEED TO PASS MEANS TESTS • What does “gross receipts” mean? • What does “whole estate” mean? • When is the financial condition of co-owners’ considered? APPLICANTS MUST DOCUMENT THEIR ELIGIBILITY

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TABLE 3. Exempt Persons - Ownership and Domiciliary Requirements (Table from DLS Course 101 Handbook, Chapter 7)

Type Clause Amount Multiple Owners

Pro-rata Amount

Minimum Ownership

Interest

Durational Ownership1 Durational Domiciliary2

BLIND 37 37A

$437.50 $500

None $5,000 None None

HARDSHIP 18 Any None None None None 18A (deferral) Any Total deferral account

may not exceed 50% of applicant’s ownership share of the property’s value

None None Domiciled in MA for 10 consecutive years before application date

SENIOR 17, 17C, 17C½ $175 None $2,000 Owned and occupied the property as domicile for any 10 years

See durational ownership

17D $175 None $2,000 Owned and occupied the property as domicile for any 5 years

See durational ownership

41 $500 % of applicant’s interest if any co-owner is not spouse

$4,000 None None

41B 41C

$500 $5003

% of applicant’s interest if any co-owner is not spouse

$4,000 Owned and occupied the property, or any other MA property, as domicile for any 5 years

Domiciled in MA for 10 consecutive years before application date4

41C½ Up to 5% of the average assessed valuation of residential property5

Owned and occupied the property, or any other MA property, as domicile for any 5 years

Domiciled in MA for 10 consecutive years before application date6

41A (deferral) Any Total deferral account may not exceed 50% of applicant’s ownership share of the property’s value

None Owned and occupied the property, or any other MA property, as domicile for any 5 years

Domiciled in MA for 10 consecutive years before application date7

1 In addition to general requirement that taxpayer own property on July 1. 2 In addition to general requirement that taxpayer occupy the property as domicile on July 1. 3 May be increased up to $1,000 by legislative body of municipality. 4 Surviving spouses who inherit the property only have to have occupied the property, or other MA property, for any five years. 5 May be increased up to 20% by legislative body of municipality 6 Surviving spouses who inherit the property only have to have occupied the property, or other MA property, for any five years. 7 Surviving spouses who inherit the property only have to have occupied the property, or other MA property, for any five years.

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Type Clause Amount Multiple Owners Pro-rata Amount

Minimum Ownership

Interest

Durational Ownership8 Durational Domiciliary9

SURVIVOR 17, 17C, 17C½, 17D

$175 None $2,000 None None

42, 43 Full % of applicant’s interest if any co-owner is not surviving spouse/minor

None None None

VETERAN 22 $400 None $2,000 None Domiciled in MA for 6 consecutive months before entering the service OR domiciled in MA for 5 consecutive years [2 consecutive year beginning FY2020 - BRAVE Act] (or if alternative local option accepted, 1 consecutive year) before applying

22A $750 None $4,000 None Same as 22 22B $1250 None $8,000 None Same as 22 22C $1500 None $10,000 None Same as 22 22D Full None None None Domiciled in MA for 5 consecutive

years [2 consecutive year beginning FY2020 - BRAVE Act] (or if alternative local option accepted, 1 consecutive year) before applying OR deceased spouse domiciled in MA for 6 consecutive months before entering the service

22E $1000 None $6,000 None Same as 22 22F Full None None None Same as 22 22H (BRAVE Act) Full None None None Domiciled in MA for 5 consecutive

years before applying OR deceased spouse domiciled in MA for 6 consecutive months before entering the service

8 In addition to general requirement that taxpayer own property on July 1. 9 In addition to general requirement that taxpayer occupy the property as domicile on July 1.

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TABLE 4. Exempt Persons - Ownership under Trusts 1. Does the trust instrument (deed, declaration of trust, will) declare that the domicile is held in trust?

IF YES, Go to 4. IF NO, GO ON TO 2↓ 2. Was the domicile conveyed to the trustee of the trust created by the trust instrument?

IF NO, STOP. Applicant still retains original ownership interest. IF YES, GO ON TO 3↓ 3. Was a life estate reserved when the domicile was conveyed to the trustee?

IF YES, STOP. The life tenant is the owner for exemption purposes. The trustee is the remainderman. IF NO, GO ON TO 4↓ 4. Is the applicant a trustee of record of the trust to which the domicile is subject as of the 7/1 personal exemption qualification date (or 1/1 residential exemption

qualification date), e.g., in recorded certificate of trust, recorded trust instrument or recorded documents showing appointment as trustee?

IF NO, GO ON TO 5. IF YES, GO ON TO 7↓ 5. Is the applicant a veteran, veteran’s spouse or veteran’s surviving spouse?

IF NO, STOP. Applicant is not an owner for exemption purposes?1 IF YES, GO ON TO 6↓ 6. Has your city or town accepted G.L. c. 59, § 5, Clause 22G?

IF NO, STOP. Applicant is not an owner for exemption purposes?2 IF YES, GO ON TO 7↓ 7. . Does the applicant have a sufficient beneficial interest in the trust to which the domicile is subject?

• Applicant in fact occupies the domicile and is presumptively a beneficiary. OR

• The trust documents show any of the following: • Applicant is a named beneficiary in a recorded certificate of trust. • Applicant is a named beneficiary in the trust instrument or referenced schedule of beneficiaries. • Applicant has an express right to occupy the domicile under the trust instrument. • Applicant has (1) a right to manage or benefit from trust assets, such as the power to amend or terminate the trust, direct the trustee in management of trust or

the right to receive distributions of income or principal, and (2) no one else has a beneficial interest in the property that is inconsistent with the applicant’s occupancy of the property as a domicile, under the trust instrument.

IF NO, STOP. Applicant is not an owner for exemption purposes. IF YES, GO ON TO 8↓

8. Is the applicant a beneficiary of record, or presumptive beneficiary by virtue of actual occupancy, as of the 7/1 (or 1/1) exemption qualification date? Assessors may rely exclusively on recorded documents to establish beneficial interest and need not analyze anything other than the instrument that created the

trust in which the domicile is an asset.3 Assessors may decide to accept other documentation and review instruments for multiple trusts, but in doing so should treat all similarly situated taxpayers in a uniform, consistent manner.

1 Kirby v. Board of Assessors of Medford, 350 Mass. 386 (1966); Moscatiello v. Board of Assessors of Boston, 36 Mass. App. Ct. 622 (1994) 2 Kirby v. Board of Assessors of Medford, 350 Mass. 386 (1966); Moscatiello v. Board of Assessors of Boston, 36 Mass. App. Ct. 622 (1994) 3 But see ATB decision ownership under multiple trusts, Barbara J. DuLuca, Trustee, Hawthorne Street 30 Realty Nominee Trust v Board of Assessors of Newton, Mass. ATB Findings of Fact and Report 2015-476.

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TABLE 5. Exempt Persons – Applicants (Table from DLS Course 101 Handbook, Chapter 7) Veterans under Clauses 22, 22A, 22B, 22C, 22D, 22E, 22F and 22H4

CLAUSE TYPE AMOUNT5 VETERAN SPOUSE SURVIVING SPOUSE

SURVIVING PARENT

22(a) Veterans with minimum 10% service connected disability

$400 X

22(b) Veterans of certain pre-World War I conflicts $400 X

22(c) Veterans awarded purple hearts $400 X

22(d) Spouses (when property is owned by spouse, not veteran) and surviving spouses of Clause 22(a) – (c) veterans or of soldiers and sailors who died serving in certain 22(b) pre-World War I conflicts

$400 X Until remarriage

22(e) Gold star parents $400 X

22(f) Surviving spouses of World War I veterans whose whole estate, less mortgage balance on property, does not exceed $20,000

$400 Until remarriage

22A Veterans who lost, or had permanent loss of use of, one hand, foot or eye in the line of duty or who were awarded the Congressional Medal of Honor, Distinguished Service Cross, Navy Cross or Air Force Cross

Prisoners of war [FY2020 – BRAVE Act]

$750 X X X

22B Veterans who lost, or had permanent loss of use of, two hands, feet or eyes in the line of duty

$1250 X X X

22C Veterans with 100% disability in the line of duty and whose domicile is specially adapted housing acquired with assistance from VA

$1500 X X X

4 Clause 22H added by BRAVE ACT 5 With the exception of Clauses 22(a-f) and 22D, if the property is greater than a single-family house, the applicant receives an exemption for only that portion that corresponds to the segment occupied.

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CLAUSE TYPE AMOUNT6 VETERAN SPOUSE SURVIVING SPOUSE

SURVIVING PARENT

22C Veterans with 100% disability in the line of duty and whose domicile is specially adapted housing acquired with assistance from VA

$1500 X X X

22D Surviving spouses (who have never remarried) of active duty military personnel (including National guardsmen on active duty) or veterans who (1) died as a proximate result of injuries sustained or diseases during active duty, or (2) went missing in action and are presumed to have died. [NEW – FY2018 - HOME Act]

Full Until remarriage

22E Veterans with 100% disability in the line of duty (annual certificate required)

$1000 X X X

22F Paraplegic veterans

Veterans with 100% disability for service-connected blindness. [NEW – FY2018 - HOME Act]

Full X X X

22G Local acceptance - Persons otherwise eligible for a Clause 22, 22A, 22B, 22C, 22D, 22E or 22F exemption when legal title is held by a trustee, conservator or other fiduciary for the person’s benefit [NEW – FY2020 – BRAVE Act]

$400 - Full X X X

22H Local acceptance - Surviving parents or guardians of active duty military personnel (including National guardsmen on active duty) or veterans who (1) died as a proximate result of injuries sustained or diseases during active duty, or (2) went missing in action and are presumed to have died. [NEW – FY2020 –BRAVE Act]

Full X

6 With the exception of Clauses 22(a-f), 22D and 22H, if the property is greater than a single-family house, the applicant receives an exemption for only that portion that corresponds to the segment occupied.

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TABLE 6. Financial Means Tests Gross Receipts (Income) • Some exemptions and the deferral are available only to applicants who have limited gross receipts (income) for the prior calendar year. • Gross receipts means income from all sources and is broader than taxable income for federal or MA income tax purposes. • It includes wages, salaries, bonuses, commissions, public and private pensions, social security, alimony, child support, lottery winnings,

interest and dividend income, capital gains, life insurance proceeds, net income from business or rental property after deduction of related business expenses and losses, public assistance, disability payments, unemployment compensation, workman’s compensation, regular cash or financial contributions or gifts from family or other persons outside the household, and any other income.

• It does not include reverse mortgage payments from a return of equity in the domicile, an asset. • The limit that applies is based on the applicant’s marital status as of July 1. • See Tables 7 and 8 for allowable deductions from gross receipts under different exemption and deferral clauses.

Whole Estate (Assets) • Some exemptions are available only to applicants who have limited whole estate (assets) as of July 1. • Whole estate means all assets (real estate and tangible and intangible personal property) to which the applicant has legal title and access as

sole, joint owner or trustee that contribute to his or her total worth and may be liquidated to pay debts and bills, acquire other assets or leave as inheritances, devises or bequests.

• It includes the cash on hand in checking and savings accounts, value of personal property, stocks, bonds, money market and individual

retirement accounts or loans receivable, value of applicant’s ownership interest in real estate, and balances of private pensions or 401(k) accounts once the applicant legally qualifies for distribution.

• It does not include cash on hand from reverse mortgage payments up to the amount of the domicile’s value that is excluded from the whole

estate limit under the particular exemption. The cash is another form of the domicile’s value. • The limit that applies is based on the applicant’s marital status as of July 1. • See Tables 7 and 9 for assets excluded from calculation of whole estate under different exemption clauses.

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TABLE 7. Exempt Persons – Gross Receipts and Whole Estate Limits (Table from DLS Course 101 Handbook, Chapter 7)

Seniors under Clauses 41, 41B, 41C and 41C½

Clause 41 Local Option Clause 41B

Local Option Clause 41C

Local Option Clause 41C½

Gross Receipts Limit Deductions: (1) Applicant – Minimum Social Security/ Retirement Allowance (set by DOR annually)1 (2) Applicant & Co-owner not Spouse - Business expenses or losses (i.e., only net profits/rental income included) If applicant/non-spousal co-owner is married, combined income of applicant and spouse/co-owner and spouse cannot exceed married limit2

Applicant & Each Co-owner not Spouse $6,000 Single $7,000 Married

Applicant & Each Co-owner not Spouse $10,000 Single $12,000 Married

Applicant & Each Co-owner not Spouse $13,000 Single $15,000 Married Allowable adjustment Applicant Only Up to $20,000 Single Up to $30,000 Married

Applicant Single/Married Income limit under “circuit breaker” state income tax credit for single person who is not head of household Allowable adjustment Applicant & Other Household Members Combined gross receipts of household members cannot exceed limit under “circuit breaker” state income tax credit for (1) married couple if household is couple, and (2) head of household if household is applicant and person other than applicant’s spouse

Whole Estate Limit3 Deductions: Applicant & Co-owner not Spouse - Registered vehicles, cemetery plots, household furniture/effects at domicile and clothing If applicant/non-spousal co-owner is married, combined assets of applicant and spouse/co-owner and spouse cannot exceed married limit

Applicant Deducts own Home (Except Any Income Producing Portion) & Each Co-owner not Spouse Includes own Home Applicant Each Co-owner not Spouse $17,000 Single $12,000 Single $20,000 Married $15,000 Married Applicant & Co-owner not Spouse each Includes own Home Applicant Each Co-owner not Spouse $40,000 Single $12,000 Single $45,000 Married $15,000 Married

Applicant & Co-owner not Spouse each Deduct own Home (Except Income Producing Portion) Applicant & Each Co-owner not Spouse $20,000 Single $23,000 Married

Applicant & Each Co-owner not Spouse each Deduct own Home (Up to 3 Family) Applicant & Each Co-owner not Spouse $28,000 Single $30,000 Married Allowable adjustment Applicant Deducts Home (Up to 4 Family) Applicant Only $40,000 Single $55,000 Married

No Limit

Annual Inflation Adjustments (COLA)

Social security/retirement deduction limit automatically increased annually as determined by DOR Clause 41, 41B and 41C gross receipts and whole estate limits automatically increased annually by COLA determined by DOR if legislative body has voted to accept G.L. c. 59, § 5(41D). Clause 41C½ gross receipts limits automatically increased annually by COLA determined by DOR for senior circuit breaker income tax under G.L. c. 62, § 6(k)(3).

1 Does not apply to Clause 41C½. 2 Does not apply to Clause 41C½. 3 Does not apply to Clause 41C½.

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TABLE 8. Deferred Taxes – Gross Receipts Limits (Table from DLS Course 101 Handbook, Chapter 7) Seniors under Clause 41A Clause 41A Limit Local Option Limit

Gross Receipts Limit Deductions: Applicant & Spouse - Business expenses or losses (i.e., only net profits/rental income included) If applicant married, combined income of both spouses must be within limit

$20,000 Up to income limit for senior who is not head of household under “circuit breaker” state income tax credit

Annual Inflation Adjustments (COLA) Local option limit fixed by legislative body vote as $ amount up to, or % of, circuit breaker limit. Circuit breaker limit adjusted annually by COLA determined by DOR under G.L. c. 62, § 6(k).

Deferral Interest Rate Deferral interest rate may be reduced below 8% by legislative body vote

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TABLE 9. Exempt Persons – Whole Estate (Table from DLS Course 101 Handbook, Chapter 7) Seniors, Surviving Spouses, Minor Children under Clauses 17, 17C, 17C½ and 17D Clause 17 Local Option Clause 17C

Local Option Clause 17C½

Local Option Clause 17D

Whole Estate Limit Deductions: Cemetery plots, household furniture/effects at domicile and clothing

$20,000 Deduct: $ Unpaid mortgage on applicant’s real estate (up to value of included real estate)

$40,000 Deduct: $60,000 in value of domicile $ Unpaid mortgage on applicant’s other real estate (up to value of included real estate)

$40,000 Deduct: $150,000 in value of domicile $ Unpaid mortgage on applicant’s other real estate (up to value of included real estate)

$40,000 Deduct: $ Value of domicile (up to 3 family) $ Unpaid mortgage on applicant’s other real estate (up to value of included real estate)

Annual Inflation Adjustments (COLA) Whole estate limit automatically increased annually by COLA determined by DOR if legislative body has voted to accept G.L. c. 59, § 5(17E).

Exemption amount increased annually by any % up to COLA determined by DOR if legislative body has voted to (1) accept G.L. c. 59, § 5 provision added by St. 1995, c. 181 and (2) fix % increase

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TABLE 10. Exempt Persons – State Reimbursements1 (Table from DLS Course 101 Handbook, Chapter 7)

Type Clause Exemption Amount Reimbursement Amount

BLIND 37

$437.50 $87.50 per exemption

37A $500 $87.50 per exemption HARDSHIP

18 Any None

SENIOR, SURVIVING SPOUSE, SURVIVING MINOR CHILDREN

17 $175 $175 per exemption

17C, 17C½, 17D $175 Total amount reimbursed in last year Clause 17 used

SENIOR 41 $500 $500 per exemption 41B, 41C

$500 $500 per exemption, up to the number of

exemptions granted in the last year Clause 41 used

41C½

5% of average assessed valuation of residential property2

Amount granted up to $500 per exemption, up to the number of exemptions granted in the last year Clause 41 used

SURVIVING SPOUSE, SURVIVING MINOR CHILDREN OF FIREFIGHTERS AND POLICE OFFICERS

42, 43 Full None

VETERAN3 22 $400 $225 per exemption 22A $750 $575 per exemption 22B $1250 $1075 per exemption 22C $1500 $1325 per exemption 22D Full Exemption granted 22E $1000 $825 per exemption 22F Full All but $175 of exemption granted 22G 400-Full None 22H Full None [FY2020 – BRAVE Act]

1 Subject to annual appropriation. 2 May be increased up to 20% by legislative body of municipality. 3 If Clause 22A, 22B, 22C and 22E granted on multi-family property, limited to amount over reimbursement granted to applicant.

17

TABLE 11. Exempt Persons – Optional Additional Exemption- (Table from DLS Course 101 Handbook, Chapter 7) Also see DLS IGR No. 15-201

EXAMPLE

Assumes Adopted for First Use in FY2021

Impact on Existing Personal Exemption Recipients

FY 2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 Assessed Tax $1000 $1050 $1075 $1100 1200 1300 1400 1500 Personal Exemption (Clause 22) (400) (400) (400) (400) (400) (400) (400) (400) Net Tax After Exemption 600 650 675 700 800 900 1000 1100 Additional Exemption Voted (100%) 400 400 400 400 400 400 400 Additional Exemption Allowed (50) (75) (100) (200) (300) (400) (400) Amount Due1 600 600 600 600 600 600 600 700

Impact on New Personal Exemption Recipients

FY 2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 Assessed Tax $1000 $1050 $1075 $1100 1200 1300 1400 1500 Personal Exemption (Clause 22) 0 (400) (400) (400) (400) (400) (400) (400) Net Tax After Exemption 1000 650 675 700 800 900 1000 1100 Additional Exemption Voted (100%) 400 400 400 400 400 400 400 Additional Exemption Allowed (0) (25) (50) (150) (250) (350) (400) Amount Due2 1000 650 650 650 650 650 650 700

1 Cannot be less than tax on 10% of domicile’s assessed valuation 2 Cannot be less than tax on 10% of domicile’s assessed valuation

18

TABLE 12. Senior/Veteran Work Programs Program Name Work-off Abatement

Requires Separate Local Acceptance G.L. c. 59, § 5K (seniors) or G.L. c. 59, § 5N (veterans)

Municipal Employment

Assistance Type Reduces by means of an abatement the local property tax liability of senior/veteran in exchange for volunteer service to municipality Abatement of actual tax is exclusive means of providing assistance and head of department where senior/veteran worked must certify hours worked and wage rate to assessors before actual tax committed

Provides supplemental income to help taxpayer pay local property taxes (or water, sewer or other local charges) Tax (or other bill) paid in part from earnings

Statutory Eligibility Senior under G.L. c. 59, § 5K – Must be 60 or older Veteran under G.L. c. 59, § 5N – Must meet definition of veteran in G.L. c. 4, § 7 Spouse of veteran with a service connected disability or surviving spouse of veteran also eligible

Determined locally

Other Eligibility (seniors/veterans who qualify for other tax reductions or co-own with others participating in program; income or assets tests, etc.)

Determined locally Determined locally

Application Procedure Varies locally Determined locally Assistance Amount $1,500 maximum abatement (or by legislative body vote, abatement attributable to 125

hours) [Maximum for veterans increased to $1,500 by BRAVE Act] Maximum hourly rate for service - state minimum wage– G.L. c. 151, § 1

Determined locally

Income Tax Treatment Federal – Abatement earned considered compensation subject to federal income and FICA taxes and must be reported to IRS (Treasurer must verify proper reporting procedure with IRS) State – Abatement earned not income for state income tax (or workmen’s compensation purposes) and need not be reported to DOR

Wages income for federal and state purposes and subject to all applicable federal and state withholding and reporting requirements

Accounting Gross earnings charged to overlay • Assessors process abatement for earnings net of federal withholdings (as

determined by treasurer) after actual tax committed and before actual bills issued • Assessors notify accounting officer of gross amount to charge overlay and notify

collector and accounting officer of abatement amount • Collector shows abatement as credit against actual tax and calculates installment

payments based on tax, as abated • Accounting officer transfers federal withholdings amount to agency account for

payment to United States (Municipal share of FICA taxes are charged to FICA appropriation, but may be charged to overlay if that appropriation not sufficient)

Gross earnings charged to appropriation Municipal share of FICA taxes charged to FICA appropriation