Massachusetts home buyers calculating the total cost of homeownership may need to remove the potential for tax breaks to repair or replace a septic system and/or for removal of lead paint. 

As part of a package of tax increases and the elimination of a variety of tax breaks, Massachusetts Governor, Deval Patrick, hopes to raise $1.9 billion annually in revenue. Two of his proposals are to eliminate the lead paint tax credit and the septic system repair / replacement credit. 

Governor Patrick also has proposed the elimination of the capital gains tax exemption on home sales in Massachusetts. 

Lead Paint Tax Credit

The lead paint removal tax credit is intended to promote lead-safe homes for children throughout Massachusetts and encourage homeowners to de-lead properties. The Massachusetts Association of Realtors (MAR) says, "... the [lead paint] tax credit is likely the most important tool available for providing meaningful incentives to property owners to bring their units into compliance with the lead law." 

Children from birth to age six are at the greatest risk of lead poisoning due to the fact that their neurological systems are developing. Lead exposure can cause hyperactivity, aggressive behavior, learning disabilities, lowered IQ, speech delay, and hearing impairment. Approximately 1.7 million homes in Massachusetts were built before 1970, so there are many current and future homeowners that could take advantage of the current lead paint tax credit.

Presently, the maximum tax credit for lead paint removal is $1,500 per residential unit for full compliance, and $500 per residential unit for interim control. You must claim the credit the year the deleading letter was issued, or the year you paid for the deleading work, whichever is later. If the credit is greater than the amount of income taxes you owe, the state allows taxpayers to carry over the balance for up to seven (7) tax years. 

Septic System Tax Credit

The septic system repair / replacement tax credit alleviates some of the financial burden of replacing or repairing a failed septic system, which is not in compliance with Title V (Title 5) regulations. 

MAR says, "First-time home buyers would also be greatly impacted if they could no longer rely on this credit, a credit that in many cases allows homeownership to become a reality."

Currently, the law affords Massachusetts taxpayers a 40% credit towards the cost of upgrades to their septic system. The Commonwealth provides a tax credit of up to $6,000 over 4 years to defray the cost of septic repairs to a primary residence. Forms are available from the Department of Revenue (DOR) to enable homeowners to claim up to $6,000 in tax credits for septic upgrades. The credit cannot exceed $1,500 in any year and may be spread out over 4 years. The tax credit is limited to work done on a primary residence.