Rep. Callahan Highlights Tax Credits and Exemptions in

The House passed a budget adjustment bill this session that sends additional aid to cities and towns that they can use for tax relief to help with the rising education costs each municipality is facing, which could offset property tax increases. Representative Patrick Callahan highlighted some of the tax changes that may be of interest to residents.

This budget adjustment creates a sales and use tax exemption for nonelectronic school supplies, like backpacks, lunchboxes, notebooks, pens, pencils, crayons, rulers, and paper. This will begin on July 1, 2026.

It also increases the exemption amount for “sales tax free week” from $100 to $300 for clothing and footwear. Sales tax free week runs from the third Sunday in August through the following Saturday. Backpacks and cleated shoes costing less than $300 are now included in the exemption.

Municipalities will be allowed to provide a $50,000 property tax exemption for taxpayers’ primary residences that are single-family homes or units in common interest communities or condominiums. Existing law allows municipalities to provide an exemption for certain owner-occupied primary residences. The bill prohibits municipalities from providing this exemption and the new exemption in the same assessment year. To adopt the new exemption under the bill, a municipality’s legislative body (or board of selectmen if the body is a town meeting) must vote in favor of it. The municipality may limit eligibility to taxpayers who meet length-of-residency requirements it sets.

To be eligible for this exemption, taxpayers must annually file a form with their assessors declaring that (1) the dwelling is their primary residence, (2) they have no other primary residence, and (3) they have not claimed the exemption for any other residence that year. This will be applicable to assessment years starting on or after October 1, 2027.

A nonrefundable income tax credit of up to $2,000 is also created in the budget adjustment bill for income-eligible family caregivers who incur eligible expenditures to care for and support an eligible family member. To qualify, the family caregiver must have federal adjusted gross income (AGI) of less than (1) $50,000 for single filers, married people filing separately, or heads of households or (2) $100,000 for joint filers. The credit equals 50% of eligible expenses incurred, up to a maximum of $2,000, for any tax year. Caregivers may apply the credit against their personal income tax liability, but not the withholding tax.