Baker Spindler Holtz                                  CPAs and Advisors

Michigan Individual Income Tax Changes - Part I

 

 

December 9, 2011
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Baker Spindler Holtz is located in the heart of downtown Grand Rapids.  We have been providing quality service to our clients for over three decades. 

Earlier this year, Governor Snyder signed legislation revamping Michigan's individual income tax structure.  This legislation will take effect on January 1, 2012.  Even though the changes don't take effect until the new year, they may give rise to planning opportunities for 2011.  Important changes that you should be aware of include the following:

 

  

Tax rate

  • The rate remains at 4.35% for tax year 2012.
  • For 2013 and each tax year thereafter the rate is 4.25%.
  • The annual .1% rate reduction is repealed.

 

Exemptions  

  • Personal exemption set at $3,700 (same as under current law) and will be indexed to inflation beginning in 2013.
  • Repeals special exemptions for seniors.
  • Repeals special exemption for unemployment compensation greater than 50% of adjusted gross income (AGI).
  • Special exemption for disabled and exemption for disabled veterans remain unchanged.
  • Phases out certain pension and retirement income subtractions based on date of birth.

 

Deductions/Subtractions  

  • Repeals certain miscellaneous deductions (political donations; prizes won in state-regulated bingo, raffle, or charity games; charitable gifts from retirement plans).
  • Repeals the Renaissance Zone deduction.
  • Repeals the $600 deduction for children 18 and under.

 

Non-refundable Credits  

  • Repeals the credit for city income taxes.
  • Repeals the credit for public contributions including Michigan colleges and universities, Michigan public libraries, and Michigan public radio stations.
  • Repeals the credit for contributions to homeless shelters, food banks, and community foundations.
  • Repeals the credit for contributions to medical savings accounts.
  • Repeals the credit for automobile donations.
  • Repeals the credit for college tuition and fees.

 

Refundable Credits  

  • Repeals the excess adoption expense credit.
  • Repeals the stillbirth credit.
  • Changes the homestead property tax credit.  Available only for homes with taxable value of less than $135,000.  For seniors with household resources of $21,000 or less, the full credit is available.  For seniors with household resources of less than $41,000, a partial credit is available.  For all others with household resources of $50,000 or less, a partial credit is available.

 

Miscellaneous  

  • Adopts 100% sales factor apportionment.

 

Please call us if you have any questions regarding the new legislation.

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