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untanglingwebs
El Supremo
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Before you file your income tax form: 6 things to know about Michigan's changes
By Melissa Anders | manders@mlive.com
on January 11, 2013 at 8:15 AM, updated January 11, 2013 at 8:16 AM
Nancy Baumgartner, bottom right, helps James Stevenson Jr. file his taxes at Hoyt Library in Saginaw in this 2012 file photo. The Volunteer Income Tax Assistance program helps low-income individuals get their taxes filed before deadline. MLive File Photo
LANSING, MI —
Many Michigan taxpayers will pay more when they file state taxes this year since many of Gov. Rick Snyder’s reforms kicked in for the 2012 tax year.
Snyder in 2011 signed a massive tax overhaul package that included some $1.4 billion in additional income taxes along with nearly $1.7 billion in business tax cuts.
The new income tax rules impact retirement income and many different credits, such as those for certain charitable donations or for low- and medium-income families.
The changes were meant to make the tax structure "fair and efficient and address structural budget deficit that plagued the state for a number of years,” said Terry Stanton, spokesman for the Michigan Department of Treasury.
One of the biggest adjustments will reduce or eliminate the Homestead Property Tax Credit for some homeowners and renters.
The state treasury sent out informational postcards to about a half million taxpayers who are most likely to be affected by the new rules, Stanton said.
Seniors age 65 and older, taxpayers with household resources of more than $50,000 and homeowners whose property has a taxable value of more than $135,000 are most likely to be impacted.
That includes North Muskegon resident Sharon Clark, 62, who says she’s unhappy with the increased tax burden.
“This follows a new taxation on retired people’s pensions, so it’s like the people who are retired and on fixed incomes are the ones who are being slammed by this,” she said.
She also noted that some people who received the postcard didn’t understand it, and said she’s concerned for seniors and others who don’t have computers or Internet access to seek more information.
The homestead credit used to be a small portion of the tax return, but now requires a few pages that need to be filled out, said Michael Bozimowski, director of state and local tax services for Rehmann, an accounting, tax and financial planning firm with 12 locations in Michigan.
Bozimowski recommended people talk to their tax preparers early in order to gain a better understanding.
“The law has changed. It’s now a fact of life we have to deal with,” he said. “Communication and preparation, not just of the return, but of the impact, is going to be key on an individual basis.”
Free volunteer-based tax preparation is available to low- and moderate-income taxpayers. Michigan State University offers free services, along with several West Michigan colleges and universities.
Information about free e-filing options is available at www.mifastfile.org.
Here are some of the key components of the tax changes with a short description. A full explanation can be found on at www.michigan.gov/taxes.
Tax rate:
Michigan reduced its income tax rate from 4.35 to 4.25 percent in October 2012. The annualized income tax rate for 2012 is 4.33 percent and applies to all income received last year.
Exemptions:
The personal exemption was increased from $3,700 to $3,763 for 2012. It will increase to $3,900 for the 2013 tax year. The following exemptions are no longer allowed: special exemption for seniors, $600 for children age 18 and younger, and unemployment compensation greater than half of adjusted gross income.
Homestead Property Tax Credit:
The maximum $1,200 credit is no longer available to homes with a taxable value greater than $135,000. That cap does not apply to rented homesteads.
Previously, taxpayers could claim a credit if their household income was $82,650 or less. Now, taxpayers with household resources (which includes more than just income) totaling more than $50,000 will no longer receive the credit. Credits are reduced for households with resources ranging from $41,001-$50,000.
Seniors can receive the full credit if their household resources are no more than $21,000. The credit would be reduced by 4 percent for each additional $1,000 in household resources up to $30,000. Senior claimants can receive 60 percent of the credit if they have resources of $30,000 to $41,000. After that, the phase out applies. A full explanation can be found here.
Retirement changes:
Pension income taxes are based on age, and joint filers go by the age of the older person.There is no change for taxpayers born before 1946. Public pensions will continue to be exempt from income taxes, and for private pensions they can subtract up to $47,309 for single filers and $94,618 for joint filers.
Taxpayers born between 1946 and 1952 receive a smaller pension tax exemption of $40,000 for joint filers and $20,000 for single filers. They can no longer exempt public pensions or subtract for interest, dividends and capital gains.
Taxpayers born after 1952 will pay taxes on all pension income, except for Social Security and military pensions. There are certain exemptions or subtractions allowed once taxpayers turn 67. See a full explanation here.
Earned Income Tax Credit:
The Michigan Earned Income Tax Credit for low- and medium-income individuals and families is reduced from 20 percent of the federal credit to 6 percent. The average credit will drop 70 percent from $439 to $132, according to the Michigan League for Public Policy.
Other tax credits:
Non-refundable tax credits for the following expenses are no longer allowed: college tuition and fees, city income taxes, automobile donations, public contributions, donations to homeless shelters, food banks, community foundations and the Family Development Program, and contributions to medical savings accounts. Refundable credits are no longer allowed for excess adoption expenses or stillbirths.
Email Melissa Anders at manders@mlive.com. Follow her on Twitter: @MelissaDAnders. Download the MLive app for iPhone and Android. |
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Fri Jan 11, 2013 9:28 am |
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Adam
F L I N T O I D
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I think "Republicans" lowered the income tax rate by a meager but appreciated .1%. We need to repeal our state income tax though.
I'm pretty sure we didn't even have any income tax under Flint's Republican Governor but then that Romney guy came in and sold us out.  |
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Adam
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Mysearchisover.com
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FB
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Fri Jan 11, 2013 2:30 pm |
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untanglingwebs
El Supremo
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Michigan Public Radio
Thu January 17, 2013
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Slowdown in Michigan disposable income growth in 2013 in part due to higher state tax burden
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By Lester Graham
Michiganders' paychecks will be smaller than most.
The State of the State speech outlines what the Governor sees as spending priorities for the state. But state taxes and spending are only part of the story. Michigan Watch has learned recovering from the Great Recession will not go as well in Michigan as the rest of the nation this year.
Let’s start with a major factor that will not only affect Michigan, but all the states. When Congress avoided the fiscal cliff, it did not extend a payroll tax holiday. As part of a stimulus package, the payroll tax was reduced from 6.2 percent to 4.2 percent for two years. That has ended. Your paycheck is smaller.
For the average Michigan family, that’s going to mean about $1 thousand less for the year.
George Fulton is an economist at the University of Michigan. He recently briefed government officials on how that will affect Michigan.
“Some people call real disposable income ‘purchasing power.’ And you can see that it turns slightly negative in 2013. This is affected by the nominal income growth and an increase in the growth of federal taxes,” Fulton explained.
But Fulton went on to say that Michigan will have weaker growth than the rest of the U.S.
That’s in part because Michigan has passed new taxes on retirees’ pensions. There’s a smaller tax credit for the working poor. Special tax exemptions for seniors and children were eliminated and the homestead property tax credit for homes valued at more than $135 thousand was eliminated.
Most businesses might be benefiting from lower taxes, but because the people won’t have as much purchasing power due to higher taxes, businesses can expect their customers to spend less this year.
We wanted to know what business owners thought of the trade-off. Aubrey Lopatin and her husband Jeremy own Arbor Teas. It’s an online business selling organic and fair trade teas.
First, how did the tax restructuring help the company? Arbor Teas has not finalized the books for 2012, but Aubrey Lopatin thinks they might not notice much difference because the company is so new.
“We’re also growing substantially. So, last year we saw about 64 percent growth and we were just quickly looking at what our sales for just the first half of January were and we’re showing about 32% growth just this month so far, so it’s hard to compare apples to apples,” she said.
Another small business owner told me Michigan’s tax restructuring saved his company thousands of dollars. He’s hoping the economists are wrong about a slowdown in Michigan’s recovery.
Aubrey Lopatin says as far as her product goes, tea is inexpensive. She does not think people are going to cut back on what they see as a little indulgence. They'll more likely cut back on more expensive purchases, putting off that new car or electronic gear like computers or TVs.
That’s not to say the Lopatin family has not been affected by Michigan’s tax restructuring.
“Our family is consolidating homes with my mother who was a teacher of 38 years in Michigan, retired teacher now having her pension taxed and she’s moving in with us. So, just personally speaking, I think everybody is just trying to make ends meet,” she told us.
So some business owners are paying for those tax cuts in other ways, personal ways.
Now, Governor Snyder says we need more tax dollars to fix roads and bridges.
“We need to invest at the state level a billion to one-point-two billion dollars a year. I also want to provide for a local option for an additional couple hundred million dollars of additional revenue,” the Governor said in his annual State of the State speech in Lansing last night.
So, that's up to $1.4 billion a year from taxpayers
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The Governor says if we don’t make the investment, it will cost us far more in the future. The Governor says we need to spend at least $10 billion over ten years, or face a cost of $25 billion in repairs if we don't.
To pay for the increase, the proposal will likely include a mix of a restructured fuel taxes and higher vehicle registration fees. The last time the state changed the fuel tax, diesel was not included because business said it would be too expensive.
So, the question this time is whether this will mean a hit for citizens pocketbooks or whether the cost will be shared by businesses? And what mix will mean a stronger economy for Michigan? |
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Fri Jan 18, 2013 10:55 am |
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