Michigan State Tax Help

How will contributions to the Children of Veterans Tuition Grant Program be used?

Help send the child of a Michigan veteran to a Michigan college or university! Contributions will be a key source of funding for the undergraduate tuition expenses for the children of certain deceased or disabled veterans.

What are other additions to federal taxable income?

Some Michigan additions to income are listed below:

  • Gross expenses from nonferrous metallic minerals extraction (subject to Michigan severance tax) to the extent deducted in AGI. You should also subtract the related income on the Michigan Subtractions screen.
  • To the extent not included in AGI, the amount of money withdrawn in the tax year from a Michigan Education Savings Program (MESP) account, including the MI 529 Advisor Plan (MAP), if the withdrawal was not a qualified withdrawal as provided in the MESP Act. You may first exclude any amount that represents a return of contributions for which no deduction was claimed in any prior tax year.
  • Refund received from a Michigan Education Trust (MET) contract. If you deducted the cost of a MET contract in previous years and received a refund from MET during 2013 because the MET contract was terminated, enter the smaller of: (1) the refund you received or (2) the amount of the original MET contract price including fees which you deducted in previous years.

How will contributions to a political campaign fund be used?

These funds are disbursed only to candidates for governor, regardless of political party, who agree to limit campaign spending and meet the campaign fund requirements. Choosing Yes will not raise your tax or reduce your refund.

What is the Michigan use tax?

You owe use tax for mail order and Internet purchases made from out-of-state sellers as well as purchases while traveling in foreign countries. Use tax must be paid on the total price (including shipping and handling charges).

Every state that has a sales tax has a companion tax for purchases made outside that state, by catalog or over the Internet. In Michigan, that companion tax is called the "use tax", but it might be described more accurately as a remote sales tax because it is a 6 percent tax owed on purchases made outside of Michigan.

For more information on use tax, see the 2013 Michigan 1040 individual income tax instructions booklet at the Michigan Department of Treasury website.

What is the Home Heating Credit (HHC)?

The Home Heating Credit (HHC) is designed to assist low income families living in Michigan with the cost of heating their homes.

Since part of this credit is calculated based on the number of people in your household, if you have a child who you don't claim as a dependent but over whom you are the custodial parent, go back to the federal dependents screen and enter the child as a "Not a dependent (EIC/Child Care Credit only)" dependent.

Who can file a Home Heating Credit claim?

To be eligible, the following must apply:

  • Your homestead must be in Michigan, and it is where you maintain a permanent residence. Note: You can have only one homestead at a time and you must be the occupant as well as the owner or renter.
  • You are not a full-time student who is claimed as a dependent on another person's income tax return.
  • You do not live in college or university-operated housing (including dormitories, residence halls, or apartments).
  • Your income is within the qualifying income levels. (we'll take care of this requirement for you)
Note: The Michigan Home Heating Credit must be claimed by September 30, 2014.

What is the Farmland Preservation Credit?

The Farmland Preservation Credit gives back to farmland owners a share of the property tax they pay on their farmland. Farmland owners qualify for the credit by agreeing to keep the land as farmland and not develop it for another use.

Who qualifies for the Farmland Preservation Credit?

You qualify if you meet all of these requirements:

  • You own farmland.
  • You have entered into a Farmland Development Rights Agreement (FDRA) with the Michigan Department of Agriculture and Rural Development (MDARD).
  • You are eligible to file Form MI-1040.

What is a Farmland Development Rights Agreement (FDRA)?

Through a Farmland Development Rights Agreement (FDRA), you receive property tax relief in return for your pledge not to change the use of your land.

Caution: The FDRA restricts development of your land. Before making any changes to property covered under this agreement or to its ownership, consult the Michigan Department of Agriculture and Rural Development (MDARD). Some changes may make your property ineligible for credit.

What is a joint ownership agreement?

An agreement is a joint ownership agreement if the land is owned by you and someone other than your spouse.

When you create a Joint Owners Agreement record, you will indicate your percentage of income and your percentage of ownership.

How do I calculate my use tax?

For information on how to calculate your use tax, see the 2013 Michigan Instructions booklet at the Michigan Department of Treasury website.

Remember, if you paid at least 6 percent to another state on your purchase, you do not owe use tax to Michigan. If you paid less than 6 percent, you only owe the difference.

Note: The full 6 percent use tax is owed on purchases made in a foreign country.

Examples of tangible personal property subject to use tax are clothing, electronics, furniture, jewelry or books. Examples of tangible personal property not subject to tax are grocery food items, prescription drugs, vitamins, newspapers and periodicals.

What types of other nontaxable income should be included in my Total Michigan Household Resources?

Nontaxable income that needs to be included in the calculation of the Michigan Homestead Credit includes:

  • Compensation for damages to character or for personal injury or sickness
  • Adoption subsidies
  • An inheritance (except for an inheritance from your spouse)
  • Proceeds of a life insurance policy paid on the death of the insured (except for benefits from a policy on your spouse)
  • Death benefits paid by or on behalf of an employer
  • Ministers housing allowance
  • Scholarship, stipend, grant, or GI bill benefits and payments made directly to an educational institution
  • Forgiveness of debt (e.g. mortgage foreclosure etc.)
  • Reimbursement from dependent care and/or medical care spending accounts
  • Payments made on your behalf except government payments made directly to an educational institution or subsidized housing project.

Household Income does NOT include:
  • Net operating loss deductions taken on your federal return
  • Payments received by participants in the foster grandparent or senior companion program
  • Energy assistance grants
  • Government payments to a third party (e.g., a doctor) Note: If payment is made from money withheld from your benefit, the payment is part of household income. (For example, the DHS may pay your rent directly to the landlord.)
  • Money received from a government unit to repair or improve your homestead
  • Surplus food or food assistance program benefits
  • State and city income tax refunds and homestead property tax credits
  • Chore service payments (these payments are income to the provider of the service)
  • The first $300 from gambling, bingo, lottery, awards, or prizes
  • The first $300 in gifts of cash or merchandise received, or expenses paid on your behalf (rent, taxes, utilities, food, medical care, etc.) by parents, relatives or friends
  • Amounts deducted from Social Security or Railroad Retirement benefits for Medicare premiums
  • Life, health, and accident insurance premiums paid by your employer
  • Loan proceeds
  • Inheritance from a spouse
  • Life insurance benefits from a spouse
  • Payments from a long-term care policy made to a nursing home or other care facility.
  • Most payments from The Step Forward Michigan program

For more information on Total Michigan Household Resources, visit the Michigan Department of Treasury Website.

What is the maximum amount I can deduct from my contributions to my Michigan Education Savings Program (MESP)?

You may deduct the total of all contributions less qualified withdrawals made during 2013 by the taxpayer in the tax year to accounts established through the MESP. The deduction may not exceed $5,000 for a single return or $10,000 for a joint return per tax year.

What are the definitions of Deaf, Blind, and Permanently Disabled?

Deaf means the primary way you receive messages is through a sense other than hearing, for example, lip reading or sign language.

Blind means your better eye permanently has 20/200 vision or less with corrective lenses, or your peripheral field of vision is 20 degrees or less.

Totally and permanently disabled excludes those age 66 or older, includes blindness, and is fully defined under Social Security Guidelines 42 USC 416.

What can I deduct in regard to my Michigan Education Trust (MET) contract?

You may deduct the following:
  • If you purchased a MET payroll deduction or monthly purchase contract, you may deduct the amount paid on that contract during 2013 (not including fees for late payments or insufficient funds). You should receive an annual statement from MET specifying this amount.
  • If you purchased a MET contract during 2013, you may deduct the total contract price (including the processing fee).
  • If you made a charitable contribution to the MET Charitable Tuition Program during 2013, you may deduct the total contribution amount. You will receive a statement from MET to confirm the amount.
  • The amount included in AGI as income to the purchaser because the MET contract was terminated.

Am I eligible for the Renaissance Zone Deduction?

To be eligible, you must meet all of the following requirements:

  • Be a permanent resident of a Renaissance Zone designated prior to January 1, 2012, for at least 183 consecutive days
  • Be approved by your local assessor's office
  • Must not be delinquent for any state or local taxes abated by the Renaissance Zone Act
  • Must file an MI-1040 each year
  • Have gross income of $1 million or less
If you were a full-year resident of a renaissance zone, you may subtract all income earned or received. Unearned income, such as capital gains, may have to be prorated. If you lived in the zone at least 183 consecutive days during 2013, you may subtract the portion of income earned while a resident of the zone.

Certain Renaissance Zones began to phase out in 2007. The tax exemption is reduced in increments of 25 percent during the Zone's final three years of existence. If you are a resident of a Zone that is phasing out (check with your local unit of government), you must reduce your credit as follows:

  • 25 percent for the tax year that is two years before the final year of designation as a Renaissance Zone
  • 50 percent for the tax year immediately preceding the final year of the designation as a Renaissance Zone
  • 75 percent for the tax year that is the final year of the designation as a Renaissance Zone.
For additional information regarding qualifications for the Renaissance Zone deduction, call the Michigan Economic Development Corporation at (517) 373-9808.

What are examples of Other Subtractions?

  • The gross income from extraction of nonferrous metallic minerals (subject to Michigan severance tax) to the extent included in federal AGI. You should also add back the related expenses on the Michigan Additions screen.
  • Any portion of a qualified withdrawal from an MESP account, including the MAP, to the extent included in federal AGI. Note: Any amounts not included in AGI or that are already deducted on the U.S. Form 1040 to arrive at the AGI do not qualify for this subtraction
  • Benefits from a discriminatory self-insured medical expense reimbursement plan, to the extent these reimbursements are included in AGI
  • Amount used to determine the credit for elderly or totally and permanently disabled from U.S. Form 1040A or U.S. Form 1040 Schedule R
  • Holocaust victim payments

You may NOT subtract:
  • Pension and retirement benefits should not be subtracted here. We'll ask you about your retirement income separately.
  • Itemized deductions from U.S. Schedule A
  • Sick pay, disability benefits, and wage continuation benefits paid to you by your employer or by an insurance company under contract with your employer
  • Unemployment benefits included in AGI, except railroad unemployment benefits
  • Contributions to national or Michigan political parties or candidates
  • Proceeds and prizes won in State of Michigan regulated bingo, raffle, or charity games
  • Distributions from a deferred compensation plan received while a resident of Michigan
  • Lottery winnings (Exception: installment payments from prizes won on or before December 30, 1988, may be subtracted.) Include installment gross winnings as reported on your Form W-2G, box 1, and show on your Schedule W, Table 1, in the appropriate box.

How will contributions to the Military Family Relief Fund be used?

The Military Family Relief Fund provides assistance to qualifying families of military members in either the Michigan National Guard who are serving in the U.S. Armed Forces or those Reserve forces called to active duty by the federal government.

How will contributions to the Children's Trust Fund of Michigan be used?

Help keep kids safe by preventing child abuse! Contributions are returned to local communities in the form of grants to county-based prevention councils and direct service programs benefiting children and parents. Programs and services funded by your donation include parent education and support groups, home visitation services, local training, and public education and outreach. The Children's Trust Fund is the Michigan chapter of Prevent Child Abuse America.

What is the Homestead Property Tax Credit?

This credit, for most people, is based on a comparison between the household income and property taxes paid. Homeowners pay property taxes directly, and renters pay them indirectly with their rent.

The credit is designed to give the greatest property tax relief to senior citizens, disabled or blind persons, and disabled veterans as well as the surviving spouse of a veteran. Michigan residents who are not in these groups but have income below certain thresholds may also qualify for the credit.

You may not claim rent paid for vacant farmland when computing your property tax credit claim. Farmland owned by an LLC may not be claimed for a homestead property tax credit by one of the individual members.

Who qualifies for a Homestead Property Tax Credit?

In order to receive the Homestead Property Tax Credit, all of the following must apply:
  • Your homestead (the place where you have your permanent home, the place you plan to return to whenever you go away) is in Michigan.
  • You were a resident of Michigan for at least 6 months during the year.
  • You pay property taxes or rent on your Michigan homestead.
  • You were contracted to pay rent or own Michigan homestead you live in.
  • Your household resources are less than $50,000.
  • Your homestead's taxable value is below $135,000.

What if I own a mobile home and not only pay property taxes for an attachment (garage, shed, deck, etc.) but also pay rent for the lot it sits on?

You should select 'Both' as the answer to the question asking if you owned or rented your homestead. As long as you are billed separately by the local assessor's office for property taxes, you would claim those taxes in the 'owner' section. Then, you would enter the rent you had to pay for the lot in the 'renter' section.

Is my vacation home or income (rental) property considered my homestead?

A vacation home or income property is not considered your homestead and doesn't qualify for this credit.

What are estimated tax payments? What do I enter on this screen?

  • Enter any estimated tax payments you made for 2013.
  • Enter any amounts credited from your 2012 return.
  • Enter any amount prepaid with extension requests.
Do NOT enter any amount of your 2013 Michigan Income Tax withheld by your employer(s) as shown on any wage or tax statements.

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