MA 62F Refund: How It Works and If It’s Taxable
Understand the Massachusetts Chapter 62F tax credit. This guide clarifies the state-mandated refund process and its financial implications for taxpayers.
A state law known as Chapter 62F requires that excess state tax revenue be returned to taxpayers. This provision was triggered in Fiscal Year 2022 when Massachusetts collected $2.941 billion more than the annual cap, which is tied to the growth of wages and salaries within the state. As a result, the state was mandated to distribute this surplus back to eligible individuals.
This refund is based on a taxpayer’s personal income tax liability from the prior tax year. The mechanism ensures that the surplus funds are returned proportionally to those who contributed to them through their state income tax payments.
Determining Your Eligibility
To qualify for the Chapter 62F refund, an individual must have filed a Massachusetts personal income tax return for the 2021 tax year. The filing must have been completed by the state’s deadline, which was September 15, 2023, to be considered eligible for this specific distribution. This requirement applies to both full-year residents and non-residents who had a Massachusetts tax obligation for 2021.
Certain individuals are not eligible to receive this refund. If a person had no personal income tax liability for the 2021 tax year, they would not receive a payment. Individuals who were claimed as a dependent on another person’s 2021 tax return do not qualify for their own separate refund.
How Your Refund Is Calculated
The refund amount is a direct percentage of your personal income tax liability from the 2021 tax year. The Massachusetts Department of Revenue finalized the rate at 14.0312% of this liability.
To find the specific figure used for this calculation, taxpayers can refer to their 2021 Massachusetts Form 1, the state’s individual income tax return. The relevant amount is the total tax liability shown on the form before any credits or other adjustments are applied. This figure represents the core tax obligation that the 14.0312% is applied against to determine the final refund amount.
For example, consider a taxpayer whose 2021 Massachusetts income tax liability was $5,000. To calculate their refund, this amount is multiplied by the official percentage. The calculation would be $5,000 multiplied by 14.0312%, which results in a refund of $701.56.
Receiving Your Payment
The distribution of the 62F refund was handled automatically by the Massachusetts Department of Revenue, with payments beginning on November 1, 2022. Taxpayers who had previously set up direct deposit for their state tax refunds received their payment electronically in their designated bank account. For all other eligible individuals, a paper check was mailed to the address on file from their 2021 tax return.
The refund amount could be reduced under certain circumstances. If a taxpayer had outstanding debts, such as unpaid tax liabilities to the state or overdue child support payments, the refund was subject to an offset. In these cases, the state would use the refund amount to cover these existing debts before sending any remaining balance to the taxpayer.
Tax Implications of the Refund
For Massachusetts state tax purposes, the refund is not considered taxable income. This means taxpayers do not need to report the payment as income on their subsequent Massachusetts state tax returns. The payment is treated as a return of previously paid taxes.
On the federal level, the taxability depends on the taxpayer’s filing choices for the 2021 tax year. The refund is not taxable for individuals who claimed the standard deduction on their federal tax return. It is also not taxable for those who itemized their deductions but did not receive a tax benefit from deducting state and local taxes, for instance, due to the $10,000 limit on the State and Local Tax (SALT) deduction.
A portion or all of the refund may be considered taxable income for federal purposes if the taxpayer itemized deductions on their 2021 federal return and received a tax benefit from the SALT deduction. The Massachusetts Department of Revenue issues a Form 1099-G to these individuals by January 31 of the year after the refund was issued, which is used for completing their federal return.