MA Septic Credit by Carolyn Flaherty

The cost to repair or replace a failed septic system can be financially crippling to home owners. As such, the Title V testing that is required as part of the sale of all Massachusetts homes can be a nerve racking undertaking. Should you find yourself the unfortunate owner of a failed system, you may find some consolation in the MA Septic Credit.

The MA Septic Credit is equal to 40% of the actual costs (actual costs not to exceed $15,000), incurred to repair or replace a failed system. The credit is available on your primary residence located in Massachusetts.

Actual costs include materials, equipment, demolition, relocation, design, engineering, testing and inspection paid to upgrade, replace or connect a failed system to a sewer system.

The maximum septic credit is $6,000 (40% of $15,000), but the maximum allowed for any one tax year is $1,500. The remaining credit is carried forward for a period not to exceed five tax years after the initial credit is claimed. The initial credit is taken on MA Schedule SC in the year in which the repair or replacement of the failed system is completed. A Certificate of Compliance or verification letter stating that the system complies with the Title V Department of Environmental Protection requirements along with the bills for costs incurred to cure the system, must be kept for your records to substantiate the credit.

Massachusetts also offers qualified home owners low interest loans and betterment for the repair or replacement of failed systems. The interest subsidy associated with any such loan or betterment will be subtracted from the Septic Credit. The reduction of the Septic Credit is generally equal to the difference between the annualized non-subsidized state interest rate (as determined under General Law c. 62C, s. 32(a)) and the state subsidized rate.

Note: The taxpayer claiming a MA Septic Credit cannot be a dependent of another. In addition voluntary repairs or replacements of a cesspool or septic tank do not qualify for the MA Septic Credit. However, if a federal or state court order or similar mandate causes the taxpayer to pay for connection to a municipal sewer system, the credit is allowed.