Last Wednesday, a new tax law was signed by Massachusetts governor Maura Healey. The bill has important implications for the state’s e-bike and transit commuters.
The law includes increased tax credits for parents and reduced tax rates for inherited wealth. Furthermore, Massachusetts taxpayers will now be able to deduct more expenses related to transit fares and bicycle costs.
Until now, Massachusetts income tax law allowed for only two limited deductions for transportation expenses. Taxpayers could deduct the amount spent on highway tolls or on Massachusetts Bay Transportation Authority (MBTA) weekly or monthly passes, as long as the total exceeded $150 per year. The maximum deduction was $750.
State Representative Tommy Vitolo, a prominent advocate for changes to the transit tax deductions, highlighted that the previous law excluded many transit riders. In an interview with StreetsblogMASS, Rep. Vitolo noted that individuals who purchased single-ride tickets, relied on regional transit authorities, or used Bluebikes were unable to benefit from the deduction.
The new law, which is retroactive to January 1, 2023, expands the range of transportation expenses eligible for deduction. The deduction now applies to any transit fare, including weekly or monthly passes.
The expanded deduction also encompasses regional transit authority fares, commuter boat fares, and bikeshare memberships. Cyclists can claim deductions for purchases, improvements, repairs, or storage. These deductions apply to both e-bikes and pedal bicycles.
However, the deduction amount remains capped at $750. With the state’s flat 5 percent income tax rate, the maximum annual tax savings from this deduction would be $37.50.
The Massachusetts Department of Revenue estimates that the expanded commuter tax deduction will reduce the overall tax burden on the state’s residents by approximately $12 million annually. This represents around 1 percent of the total tax cuts passed last Wednesday.
The new tax law will decrease Massachusetts’s annual revenue by roughly $1 billion.
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