2023 Michigan
Taxpayer
Assistance Manual
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Table of Contents
CHAPTER 1 - INTRODUCTION .....................................................................................................................................7
INTRODUCTION TO THE TAXPAYER ASSISTANCE MANUAL....................................................................................7
INFORMATION FOR 2023: ......................................................................................................................................7
WHAT’S NEW..........................................................................................................................................................7
SUMMARY OF CHANGES FOR 2023..................................................................................................................... 10
SUMMARY OF CHANGES FOR PRIOR YEARS........................................................................................................ 11
GENERAL GUIDELINES ......................................................................................................................................... 11
COPY OF RETURN............................................................................................................................................. 11
SIGNATURES .................................................................................................................................................... 12
RELEASE TO DISCUSS INFORMATION .............................................................................................................. 12
ARRANGING AND MAILING RETURNS AND ATTACHMENTS ........................................................................... 12
POSTAGE.......................................................................................................................................................... 12
DECEASED TAXPAYER ...................................................................................................................................... 12
COMPLETEING A PAPER-FILED RETURN .......................................................................................................... 13
ELECTRONIC FILING PROGRAMS ......................................................................................................................... 13
How Fed/State (Linked) E-File Works.............................................................................................................. 15
How State Standalone (Unlinked) E-File Works .............................................................................................. 15
Who May Participate....................................................................................................................................... 16
Application and Acceptance Process............................................................................................................... 16
Michigan Portion of the Electronic Return...................................................................................................... 16
Electronic Michigan Returns............................................................................................................................ 17
Nonelectronic Portion of Michigan Returns.................................................................................................... 22
Michigan E-file Signature Process ................................................................................................................... 22
TAX REFUND AND PAYMENT INFORMATION...................................................................................................... 23
STATE RETURNS............................................................................................................................................... 23
CITY OF DETROIT RETURNS.............................................................................................................................. 25
FOR MORE INFORMATION .............................................................................................................................. 25
POST-FILING INFORMATION................................................................................................................................ 26
MAILING ADDRESSES....................................................................................................................................... 26
AMENDED MICHIGAN INCOME TAX RETURNS (SCHEDULE AMD) .................................................................. 26
CUSTOMER SELF-SERVICE................................................................................................................................ 27
CHAPTER 2 – MICHIGAN INCOME TAX (FORM MI-1040) ........................................................................................ 32
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GENERAL INFORMATION..................................................................................................................................... 32
MI-1040 ........................................................................................................................................................... 32
FILING REQUIREMENTS ................................................................................................................................... 32
DUE DATE OF RETURN..................................................................................................................................... 33
EXTENSION ...................................................................................................................................................... 33
IDENTIFICATION SECTION................................................................................................................................ 34
SOCIAL SECURITY NUMBER(S) ......................................................................................................................... 34
SCHOOL DISTRICT CODE .................................................................................................................................. 34
STATE CAMPAIGN FUND.................................................................................................................................. 34
FILING STATUS ................................................................................................................................................. 35
RESIDENCY STATUS.......................................................................................................................................... 35
NONRESIDENT ALIENS ..................................................................................................................................... 36
EXEMPTIONS.................................................................................................................................................... 36
ADJUSTED GROSS INCOME.................................................................................................................................. 38
ADDITIONS TO ADJUSTED GROSS INCOME ..................................................................................................... 38
SUBTRACTIONS FROM ADJUSTED GROSS INCOME......................................................................................... 38
PENSION AND RETIREMENT BENEFTIS INFORMATION ....................................................................................... 40
GENERAL INFORMATION................................................................................................................................. 40
EMPLOYER PLANS............................................................................................................................................ 40
INDIVIDUAL PLANS .......................................................................................................................................... 41
PENSION LIMITATIONS .................................................................................................................................... 43
UNLIMITED PUBLIC PENSION SUBTRACTION .................................................................................................. 45
MICHIGAN AND FEDERAL PUBLIC PENSIONS .................................................................................................. 45
PUBLIC PENSIONS FROM OTHER STATES ........................................................................................................ 46
PRIVATE PENSIONS.......................................................................................................................................... 46
RAILROAD PENSION BENEFITS......................................................................................................................... 46
PENSION SUBTRACTION EXAMPLES ................................................................................................................ 47
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) .................................................................................................. 48
2023 PENSION AND RETIREMENT SUBTRACTION TABLE FOR RETIREES BORN BEFORE 1946........................ 48
FORM 1099-R DISTRIBUTION CODES............................................................................................................... 49
DEFERRED COMPENSATION ................................................................................................................................ 50
INTEREST, DIVIDENDS, AND CAPITAL GAINS DEDUCTION .................................................................................. 50
FOR SENIOR CITIZENS BORN BEFORE 1946 ......................................................................................................... 50
TAX INFORMATION.............................................................................................................................................. 51
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TAX RATE ......................................................................................................................................................... 51
VOLUNTARY CONTRIBUTIONS......................................................................................................................... 51
USE TAX ........................................................................................................................................................... 51
TAX CREDITS (NONREFUNDABLE)........................................................................................................................ 51
WHAT IS A NONREFUNDABLE TAX CREDIT...................................................................................................... 51
CREDIT FOR INCOME TAX IMPOSED BY QUALIFIED GOVERNMENT UNITS OUTSIDE OF MICHIGAN.............. 51
MICHIGAN HISTORIC PRESERVATION CREDIT ................................................................................................. 53
TAX CREDITS (REFUNDABLE) ............................................................................................................................... 53
HOMESTEAD PROPERTY TAX CREDIT .............................................................................................................. 53
FARMLAND PRESERVATION TAX CREDIT......................................................................................................... 53
EARNED INCOME TAX CREDIT ......................................................................................................................... 54
INCOME TAX WITHHELD.................................................................................................................................. 54
CLAIM OF RIGHT DOCTRINE ............................................................................................................................ 54
ESTIMATED PAYMENTS/CREDIT FORWARD .................................................................................................... 54
CHAPTER 3 – HOMESTEAD PROPERTY TAX CREDIT (FORM MI-1040CR AND FORM MI-1040CR-2) ....................... 55
GENERAL INFORMATION..................................................................................................................................... 55
INTRODUCTION ............................................................................................................................................... 55
CREDIT REFUND............................................................................................................................................... 55
INSTRUCTIONS................................................................................................................................................. 55
WHO MAY CLAIM A CREDIT............................................................................................................................. 55
HOMESTEADS THAT DO NOT QUALIFY............................................................................................................ 56
CALCULATION OF THE CREDIT......................................................................................................................... 56
SENIOR CREDIT REDUCTION CHART .................................................................................................................... 57
PERCENT OF PROPERTY TAXES NOT REFUNDABLE - TOTAL HOUSEHOLD RESOURCES OF $6,000 OR LESS ... 58
MAXIMUM CREDIT .......................................................................................................................................... 58
PHASE-OUT...................................................................................................................................................... 58
CREDIT PHASE-OUT CHART.................................................................................................................................. 58
WHEN TO FILE A CLAIM ................................................................................................................................... 59
WHICH FORM TO USE (MI-1040CR OR MI-1040CR-2)..................................................................................... 59
IDENTIFICATION................................................................................................................................................... 60
SOCIAL SECURITY NUMBER(S) ......................................................................................................................... 60
SCHOOL DISTRICT CODE .................................................................................................................................. 60
AGE 65 OR OLDER............................................................................................................................................ 60
DISABILITY DEFINITIONS .................................................................................................................................. 60
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FILING STATUS ................................................................................................................................................. 61
RESIDENCY STATUS.......................................................................................................................................... 61
COMPUTATION.................................................................................................................................................... 62
PROPERTY OWNER .......................................................................................................................................... 62
RENTER ............................................................................................................................................................ 64
TYPES OF HOUSING ......................................................................................................................................... 65
TOTAL HOUSEHOLD RESOURCES (THR)............................................................................................................... 68
TOTAL HOUSEHOLD RESOURCES CALCULATION............................................................................................. 72
REPORTED THR LOWER THAN REPORTED LIVING EXPENSES.......................................................................... 72
CREDIT COMPUTATION METHODS...................................................................................................................... 73
GENERAL CLAIMANT........................................................................................................................................ 74
PARAPLEGIC, QUADRAPLEGIC, HEMIPLEGIC, DEAF, BLIND, OR TOTALLY AND PERMANENTLY DISABLED
PERSONS.......................................................................................................................................................... 74
SENIOR CITIZEN - REGULAR METHOD FOR HOMEOWNER OR RENTER .......................................................... 75
SENIOR CITIZEN - ALTERNATIVE METHOD FOR RENTER ................................................................................. 76
(RENT GREATER THAN 40% OF THR) ............................................................................................................... 76
SERVICE PERSONS, VETERANS, OR THEIR WIDOW OR WIDOWER.................................................................. 77
BLIND PERSON ................................................................................................................................................. 78
PUBLIC ASSISTANCE/ MICHIGAN DEPARTMENT OF HEALTH and HUMAN SERVICES BENEFITS RECIPIENT ... 79
SPECIAL SITUATIONS........................................................................................................................................ 80
CHAPTER 4 – HOME HEATING CREDIT (FORM MI-1040CR-7)................................................................................. 87
GENERAL INFORMATION..................................................................................................................................... 87
INTRODUCTION ............................................................................................................................................... 87
INSTRUCTIONS................................................................................................................................................. 87
WHEN TO FILE A CLAIM ................................................................................................................................... 87
ELIGIBILITY ....................................................................................................................................................... 87
IDENTIFYING INFORMATION ........................................................................................................................... 88
CITIZENSHIP STATUS........................................................................................................................................ 88
HEAT PROVIDER AND HEAT TYPE CODE .......................................................................................................... 88
FILING STATUS ................................................................................................................................................. 88
RESIDENCY STATUS.......................................................................................................................................... 88
HOW MUCH WERE YOU BILLED FOR HEAT?.................................................................................................... 89
CARE FACILITY.................................................................................................................................................. 89
EXEMPTIONS.................................................................................................................................................... 89
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DEPENDENTS AND HOUSEHOLD MEMBERS.................................................................................................... 90
COMPUTATION.................................................................................................................................................... 90
TOTAL HOUSEHOLD RESOURCES (THR)........................................................................................................... 90
STANDARD CREDIT OR ALTERNATE CREDIT COMPUTATION: ......................................................................... 91
WHICH METHOD TO USE................................................................................................................................. 91
STANDARD CREDIT COMPUTATION FOR 2023................................................................................................ 91
ALTERNATE CREDIT COMPUTATION FOR 2023 ............................................................................................... 94
CREDIT PAYMENTS ENERGY DRAFTS OR WARRANTS (CHECKS)...................................................................... 95
DIRECT DEPOSIT............................................................................................................................................... 96
CHAPTER 5 – ADDITIONAL INFORMATION.............................................................................................................. 97
TAXABILITY OF FEDERAL OBLIGATIONS............................................................................................................... 97
INCOME ALLOCATION CHART.............................................................................................................................. 99
INCOME AND DEDUCTIBLE ITEMS, SUMMARY CHART ..................................................................................... 101
MICHIGAN CITIES LEVYING AN INCOME TAX .................................................................................................... 108
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CHAPTER 1 - INTRODUCTION
INTRODUCTION TO THE TAXPAYER ASSISTANCE MANUAL
The Taxpayer Assistance Manual is a guide to completing the following Michigan income tax forms:
• MI-1040
MICHIGAN INDIVIDUAL INCOME TAX RETURN
• MI-1040CR
HOMESTEAD PROPERTY TAX CREDIT CLAIM
• MI-1040CR-2
HOMESTEAD PROPERTY TAX CREDIT CLAIM FOR
VETERANS AND BLIND PEOPLE
• MI-1040CR-7
HOME HEATING CREDIT CLAIM
This Manual does not supersede the Income Tax Act of 1967 or the Revenue Act of 1941, both as
amended.
This Manual is provided as a useful tool to assist volunteer tax preparers when preparing a return. It
covers most taxpayer situations that are likely to be encountered by a volunteer preparer and should
be used in conjunction with the instruction booklets for each form when preparing the tax return. If a
taxpayer’s circumstance is unusual or if a volunteer preparer is unsure of how to apply these
instructions, call the Michigan Department of Treasury (Treasury) Volunteer Help Line at 1-888-860-
8389. Additional information on more complex issues is also in the Tax Text for tax practitioners
available at www.michigan.gov/taxes.
INFORMATION FOR 2023:
WHAT’S NEW
RAB 2022-26 Treatment of Ordinary and Necessary Expenses for Certain Marihuana Establishments
RAB 2022-26 explains the income tax expense deduction provided under the Michigan Regulation and
Taxation of Marihuana Act (Initiated Law 1 of 2018) (MRTMA) available to certain marihuana
establishments. The MRTMA regulates and taxes what is commonly referred to as adult-use, as
opposed to medical, marihuana. A marihuana establishment validly licensed under the MRTMA can
deduct on its Michigan income tax return those “ordinary and necessary” business expenses that it is
otherwise prohibited from deducting on its federal return due to Internal Revenue Code (IRC) Sec.
280E. This deduction is only available to MRTMA licensees and not medical licensees. In addition, the
RAB explains how the income tax deduction applies to taxpayers holding licenses to operate both
medical and adult-use marihuana businesses.
RAB 2023-14 Impact of COVID-19 Extensions and Penalty and Interest Waivers on the Statute of
Limitations
RAB 2023-14 describes the impact of Covid-19 extensions and waivers on the statute of limitations for
Individual Income Tax (IIT), Corporate Income Tax (CIT), and Sales, Use, and Withholding (SUW) taxes.
The Michigan Department of Treasury (Treasury) issued multiple notices during the Covid-19 pandemic
that extended filing deadlines and waived penalty and interest for late filing and remittance of tax, due
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to the impact of the pandemic on individuals and businesses. Generally, income tax extensions
extended the due date of the return, and therefore, has an impact on the statute of limitations.
Conversely, the sales and use tax notices were merely waivers of penalty and interest for late filing and
do not impact the statute of limitations.
RAB 2023-22 Individual Income Tax – Treatment of Retirement Income Under Public Act 4 of 2023
RAB 2023-22 discusses the tax treatment of retirement and pension income following the changes to
Section 30 of the Michigan Income Tax Act (MITA) enacted by Public Act 4 of 2023 (PA 4). The RAB also
discusses Pre-2012 Michigan tax treatment of retirement distributions and Post-2012 Michigan tax
treatment of retirement distributions.
RABs are located under the “Reports and Legal” tab on Treasury’s website.
Legislation
2023 PA 4 Retirement and Pension Income Tax Deduction: PA 4 allows a taxpayer to make an election,
choosing between the existing limitations for deductions of retirement and pension income and
limitations for the new pension phase-in income tax deduction. The PA 4 phase-in subtraction will take
effect in 2023.
The existing retirement and pension limitations provide an income tax deduction for taxpayers based
upon the year in which the taxpayer was born.
The new limitations are phased-in percentages of the maximum private retirement deduction
available. The maximum private retirement deduction is adjusted annually. PA 4 provides that:
• Beginning with the 2023 tax year, taxpayers born after 1945 and before 1959 are able to deduct
retirement or pension benefits up to 25% of the maximum private retirement deduction for the
taxpayers born before 1946. For tax year 2023, the deduction is $15,380 for single filers and
$30,759 for joint filers.
• For tax year 2024, taxpayers born after 1945 and before 1963 will be able to elect to deduct
retirement and pension benefits up to 50% of the maximum private retirement deduction for
the taxpayers born before 1946.
• In the 2025 tax year, taxpayers born after 1945 and before 1967 will be able to elect to deduct
retirement and pension benefits up to 75% of the maximum private retirement deduction for
the taxpayers born before 1946.
• For the 2026 and subsequent tax years, taxpayers will be able to elect to deduct retirement and
pension benefits up to 100% of the maximum private retirement deduction.
Public Safety Employees: Beginning with tax year 2023, certain taxpayers receiving retirement or
pension benefits from service performed as a public police or fire department employee, state police
trooper or state police sergeant, or county corrections officer in a county jail, work camp, or other
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facility maintained by a county that houses adult prisoners may also elect to deduct pension or
retirement benefits without any additional limitations.
Earned Income Tax Credit: PA 4 also increased the refundable Earned Income Tax Credit from 6% of
the federal credit to 30% of the federal credit for tax year 2022. Taxpayers that claimed the credit for
tax year 2022 are not required to file an amended return to receive the additional 24% of the credit.
Increased Exemptions
The personal exemption amount for 2023 is $5,400. The stillbirth exemption for 2023 is $5,400. The
special exemption amount for 2023 is $3,100.
Income Tax Rate
The income tax rate for 2023 is 4.05 percent.
Anatomical Gift Donor Registry
2023 PAs 100 to 102 require Treasury to allow taxpayers to register for the anatomical gift donor
registry as part of filing an individual income tax return. An individual taxpayer willing to participate in
the anatomical gift donor registry must complete the Voluntary Contributions and Anatomical Gift
Donor Registry Schedule (Form 4642) and submit it with the taxpayer’s State income tax return.
Treasury will forward the information to the Michigan Department of State to be added to the registry.
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SUMMARY OF CHANGES FOR 2023
Tax Rate
4.05%
Personal Exemption
$5,400
Special Exemption
$3,100
Qualified Disabled Veteran Deduction
$400
Stillbirth Exemption
$5,400
Tier 2 Michigan Standard Deduction. Taxpayers born January 1,
1946, through December 31, 1952. The deduction is $40,000 for
married filing joint and $20,000 for single/married filing separate if
the older of you or your spouse (if married filing joint) has reached
the age of 67.
Tier 3 Michigan Standard Deduction. Taxpayers born January 1,
1953, through January 1, 1957. The deduction is $40,000 for
married filing joint and $20,000 for single/married filing separate if
the older of you or your spouse (if married filing joint) has reached
the age of 67 on or before December 31, 2023. The standard
deduction against all types of income may be reduced by personal
exemption amounts, taxable Social Security benefits, military
compensation (retirement benefits included), Michigan National
Guard retirement benefits and railroad retirement benefits
included in adjusted gross income (AGI).
Pension Deduction:
Single Filer
(2012 Limitations)
Born before 1946: private pension limit
$61,518
Born in 1946-1952: Standard deduction against all income
$20,000
Born after 1952, pension not deductible*
0
(2023 Phase-in Limitations)
Born 1946 through 1958
$15,380
Joint Filers
(2012 Limitations)
Born before 1946: private pension limit
$123,036
Born in 1946-1952: Standard deduction against all income
$40,000
Born after 1952, pension not deductible*
0
(2023 Phase-in Limitations)
Born 1946 through 1958
$30,759
Senior Interest, Dividend, and Capital Gains
Single Filer (not available for senior born after 1945)
$12,697
Joint Filers (not available for senior born after 1945)
$25,394
*Exception: Taxpayers who have reached age 62 and receive pension benefits from
Social Security exempt employment may be eligible for a pension deduction. See Pension
and Retirement Benefits.
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SUMMARY OF CHANGES FOR PRIOR YEARS
2019
2020
2021
2022
Tax Rate
4.25%
4.25%
4.25%
4.25%
Personal Exemption
$4,400
$4,750
$4,900
$5,000
Stillbirth Exemption
$4,400
$4,750
$4,900
$5,000
Special Exemption
$2,700
$2,800
$2,800
$2,900
Qualified Disabled Veteran Deduction
$400
$400
$400
$400
Pension Deduction
Single Filer:
Born before 1946: private pension limit
$52,808
$53,759
$54,404
$56,961
Born after 1945 and age 67 or older:
Standard deduction against all income
$20,000
$20,000
$20,000
$20,000
Born 1946 through 1952 and age 66 or less
$20,000
$20,000
$20,000
$20,000
Born after 1952, pension not deductible
0
0
0
0
Joint Filers:
Born before 1946: private pension limit
$105,615
$107,517
108,808
$113,922
Born after 1945 and age 67 or older:
Standard deduction against all income
$40,000
$40,000
$40,000
$40,000
Born 1947 through 1952 and age 66 or less
$40,000
$40,000
$40,000
$40,000
Born after 1952, pension not deductible
0
0
0
0
Senior Interest, Dividend, and Capital Gains
Single Filer (not available for senior born
$11,771
$11,983
$12,127
$12,697
after 1945)
Joint Filers (not available for senior born
$23,542
$23,966
$24,254
$25,394
after 1945)
Note: For additional information on topics in this chapter, visit www.michigan.gov/taxes
select “Individual Income Tax,” and “Reports and Legal” tab for a list of resources.
GENERAL GUIDELINES
COPY OF RETURN
E-Filed Returns: When electronically filing (e-filing), provide the taxpayer with a paper copy of the
return. It may be helpful to mark “COPY” on the taxpayer’s copy to eliminate any confusion and
reduce the number of duplicate returns received, for instance when a taxpayer’s return is e-filed and
then later mailed.
Paper Returns: Prepare all returns in duplicate. File the original return and give the copy to the
taxpayer. Inform the taxpayer that it is important to keep a copy of the return.
In e-filed or paper return filings, if there are problems regarding the tax return, the taxpayer will be
able to refer to the copy to see exactly what was entered on the return. Advise the taxpayer to bring
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the copy the following tax year to expedite preparation.
SIGNATURES
After you have prepared the return, enter your site designation and the date prepared in the
preparer’s signature area. Then have the taxpayer (and spouse, if applicable) sign and date the return.
RELEASE TO DISCUSS INFORMATION
Ask the taxpayer if they want to authorize personnel in Treasury to discuss the return with the
volunteer tax preparer if additional information is needed. If so, have the taxpayer check the box.
NOTE: Since volunteer preparers do not enter their name, this instruction is generally applicable only
to paid preparers.
ARRANGING AND MAILING RETURNS AND ATTACHMENTS
Each form contains a two-digit attachment sequence number in the upper-right corner to help guide
with the proper assembly of the Individual Income Tax Return (Form MI-1040) and related schedules.
Place all supporting documents at the end.
Do not attach the Home Heating Credit Claim (Form MI-1040CR-7) to the other returns. Fold it
and leave it loose in the envelope.
Mail the return to the address shown on the bottom of the return.
POSTAGE
The U.S. Post Office calculates postage based on the weight, size, and thickness of an envelope.
Consult with the Post Office to avoid delays in delivery; items with insufficient postage will be returned
to the sender by the Post Office.
DECEASED TAXPAYER
If a deceased taxpayer has a surviving spouse and a joint return is filed, use both surviving and
deceased spouse’s names and Social Security numbers (SSN). Enter “DECD” after the deceased’s
name. Include all income (including the deceased spouse’s) on the return. A full exemption
allowance is allowed for the deceased spouse.
If there is no surviving spouse and you are preparing a return for the personal representative or a
claimant filing single or joint returns for deceased taxpayer(s), you must attach a copy of U.S. Form
1310 or Michigan Claim for Refund Due a Deceased Taxpayer (Form MI-1310). Enter the deceased
person’s name(s) in Filer and Spouse Name fields as indicated and the representative/claimant
name(s), title, and address in the Home Address field on the MI-1040.
For examples, refer to the MI-1040 instruction booklet.
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COMPLETEING A PAPER-FILED RETURN
Treasury uses scanning equipment to capture the information from paper income tax returns. To avoid
unnecessary delays caused by manual processing, follow the guidelines below, so that returns are
processed quickly and accurately.
• Use black or blue ink. Do not use pencil, red ink, or felt tip pens. Do not highlight information.
• Print using capital letters (UPPER CASE): Capital letters are easier to recognize.
• Print numbers like this: 0 1 2 3 4 5 6 7 8 9. Do not put a slash through the zero or seven.
• Leave lines/boxes blank if they do not apply or if the amount is zero.
• Do not write extra numbers, symbols, or notes on the return, such as cents, dashes, decimal
points, or dollar signs. Enclose any explanations on a separate sheet unless instructed to write
explanations on the return. The taxpayer’s name, SSN, tax year, and form number should be
entered on any attachments.
• Stay within the lines when entering information in boxes.
• Use whole dollars. Round down amounts less than 50 cents. Round up amounts of 50 cents
through 99 cents. Do not enter cents (e.g., 129.49 becomes 129, 129.50 becomes 130).
Treasury has seen an increase in the volume of both returns and e-file payment vouchers with a
masked or truncated SSN and bank account number information. Taxpayers have been mailing the
masked copy of their documents instead of the copy with the full account information displayed, which
may cause significant delays in processing the returns and payments. Tax preparers should emphasize
to their customers the importance of not mailing the masked copies.
ELECTRONIC FILING PROGRAMS
Information included in this section was current at the time of this publication.
Department of Treasury (Treasury) partners with the Internal Revenue Service (IRS) to provide
electronic filing (e-filing) of IIT returns. The Fed/State e-file Program enables taxpayers to e-file both
federal and State (including the City of Detroit) returns through tax preparers as part of the program’s
effort to provide “one-stop shopping” for tax preparation and filing. The State and/or City Unlinked e-
file Program enables taxpayers to e-file their State and/or City of Detroit return separately from their
federal return.
Nearly 100 million people nationwide know e-filing is the way to go! Over 4 million
Michigan taxpayers choose to e-file their tax returns. Thank you for making e-file a
success.
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Tax preparers who complete 11 or more IIT returns are required to e-file all eligible returns. Software
developers producing tax preparation software or computer-generated forms must support e-file for
all Michigan and City of Detroit IIT forms that are included in the software package.
Michigan, along with many other state revenue agencies, is requesting additional information in an
effort to combat stolen-identity tax fraud to protect taxpayers and their tax refund. If the taxpayer has
a driver’s license or state-issued identification card, please provide the requested information from it.
Providing the information could help process their return more quickly. The return will not be rejected
if the taxpayer’s driver’s license or state-issued identification information is not provided.
There are many benefits to tax preparers who participate in the e-file program:
• Expanded services offered. E-file is a valuable addition to a tax preparer’s list of client services,
which can mean more clients. In addition, prospective clients can find an authorized e-file provider
at www.IRS.gov.
• Faster refunds for e-file returns. E-filed returns are processed faster than paper returns. Allow 14
days before checking the status of the Michigan e-filed return by visiting www.michigan.gov/iit and
clicking on “eServices Individual Income Tax.” Clients can also choose direct deposit and have their
state refund deposited directly into their account at the financial institution of their choice. Clients
can check the status of their City of Detroit e-filed return by visiting www.michigan.gov/citytax.
• Payment with tax due returns. Payment on a 2021, 2022 or 2023 tax due return can be made using
direct debit at the same time the tax return is e-filed, when supported by software.
• Improved return accuracy. Treasury processes the same data the tax preparer enters into the
computer. When e-filing federal, State, and City of Detroit returns together, much of the same data
is used, so information is entered only once, again lessening the possibility of error. Treasury
systems automatically check returns for mistakes. When easy-to-fix mistakes like math errors or
missing forms are found, the return is sent back for correction. The error can then be fixed and sent
back to Treasury, which prevents a simple mistake from holding up a refund.
• Detailed error conditions. Modernized e-File (MeF) business rules pinpoint the location of the error
in the return and provide complete information in the acknowledgement file that is passed back to
the transmitter. MeF business rules use simple wording to clarify each error that triggers a
rejection. Treasury will provide up to ten business rule errors per return submission.
• Increased customer satisfaction. Only tax preparers and their client see the return. Tax information
is encrypted and transmitted directly to the IRS and Michigan. Also, an acknowledgment is sent to
verify the return was received and accepted for processing.
• Prior year and amended returns. Michigan and City of Detroit tax returns for 2021, 2022, and 2023
will be accepted during the 2024 processing year.
• Portable Document Format (PDF) attachments. MeF accepts PDF attachments with e-filed returns.
Refer to the “Michigan Portion of the Electronic Return” section for a listing of PDF attachments
accepted by Michigan.
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How Fed/State (Linked) E-File Works
Tax preparers and transmitters accepted into the IRS Fed/State 1040 MeF Program may file federal
and/or State (including City of Detroit) returns together in one transmission to the IRS Service Center.
The State submission can be linked to the IRS submission by including the IRS Submission ID of the
federal return. If the State submission is linked to an IRS submission (also referred to as the Fed/State
return), the IRS will check to see if there is an accepted IRS Submission ID. If there is not an accepted
federal return, the IRS will deny the State submission and a rejection acknowledgment will be sent to
the transmitter. Treasury has no knowledge that the State return was rejected by the IRS. If there is an
accepted federal return under the Submission ID, the IRS will perform minimal validation on the State
submission. The State data will then be made available for retrieval by Treasury. After the State data is
retrieved, it will be acknowledged and, if accepted, processed by Treasury.
Treasury will acknowledge receipt of all returns retrieved from the IRS. The transmitter should receive
the Michigan acknowledgment within three days from the date the return is successfully transmitted
to the IRS.
The IRS recommends sending the IRS submission first and, after it has been accepted, sending the State
submission.
When filing a Michigan return that includes City of Detroit forms, an error occurring in either the State
or City form will cause the entire submission (State and City) to be rejected.
All returns, whether e-filed or paper-filed, are subject to Treasury audit and can be delayed regardless
of the acknowledgment code received. Returns are processed and refunds are issued daily.
How State Standalone (Unlinked) E-File Works
The federal return does not have to be e-filed and accepted before e-filing the state unlinked return.
However, the federal tax return should be computed before computing the state tax return.
Tax preparers and transmitters accepted in the IRS e-file Program may participate in the State unlinked
e-file Program when supported by their software. The IRS will perform minimal validation on the State
return and issue an acknowledgment. If the return passes validation, the State data will be made
available for retrieval by Treasury. After the data is retrieved, it will be acknowledged and, if accepted,
processed by Treasury.
When filing a Michigan return that includes City of Detroit forms, an error occurring in either the State
or City form will cause the entire submission (State and City) to be rejected.
All returns, whether e-filed or paper-filed, are subject to Treasury audit and can be delayed regardless
of the acknowledgment code received. Returns are processed and refunds are issued daily.
15
Who May Participate
E-filing of Michigan returns is available to all individuals who have been accepted into the IRS e-file
Program and who transmit returns to an IRS Service Center. The IRS mandates preparers filing 11 or
more IIT returns to e-file those returns, with minor exceptions. Michigan would expect any preparer e-
filing federal returns to also e-file the Michigan and/or City of Detroit returns.
Application and Acceptance Process
To participate, applicants must first apply to the IRS and be accepted. Individuals must register with IRS
e-Services and create a new or revised IRS e-file application. Individuals can contact IRS e-help toll-free
at 1-866-255-0654 for assistance.
Publication 3112 IRS e-file Application and Participation specifies the application process and
requirements for federal participation. The definitions used by the IRS of the various categories of e-
filers, Electronic Return Originators (EROs), transmitters, or software developers also apply for
Michigan e-filing purposes.
Once accepted into the IRS e-file Program, participation in Michigan’s e-file Program is automatic.
Michigan will use the Electronic Filer Identification Number (EFIN) assigned by the IRS. Michigan does
not assign additional identification numbers.
IRS regulations require paid tax preparers to use Preparer Tax Identification Numbers (PTINs) for all tax
returns and refund claims. Visit the IRS website at www.irs.gov for more information.
To participate in Michigan e-file Programs, e-filers must use software that has successfully completed
the IRS and Michigan Assurance Testing System (ATS). Confirm that the software chosen has been
approved for Michigan and that the Michigan e-file Program is operational before transmitting returns.
If, after acceptance, a tax preparer/transmitter or software company has production problems,
Treasury reserves the right to suspend that tax preparer/transmitter or software company until the
problems are resolved to Treasury’s satisfaction.
Treasury may conduct a suitability check on applicants who have been accepted in the Fed/State e-file
Program. Participation in the program may be denied if a company is not registered to conduct
business in Michigan, or if there is an outstanding tax liability with Michigan.
A list of approved software companies is available on Treasury’s website. Tax preparers are not
required to file test returns with Michigan.
Michigan Portion of the Electronic Return
The Michigan portion of an electronic return consists of data transmitted electronically and the
supporting paper documents. The paper documents contain information that cannot be transmitted
electronically.
16
Electronic Michigan Returns
Michigan e-file supports the following forms and schedules:
Form
Title
3174
Direct Deposit of Refund
4013
Resident Tribal Member Annual Sales Tax Credit
4642
Voluntary Contributions Schedule
4884
Pension Schedule
4973
Pension Continuation Schedule
4976
Home Heating Credit Claim MI-1040CR-7 Supplemental
5049
Married Filing Separately and Divorced or Separated Claimants Schedule
5472
Direct Debit of Individual Income Tax Payment
5530
Amended Return Explanations of Changes (Sch AMD)
5595
Excess Business Loss MI-461
5674
Net Operating Loss Deduction
5678
Signed Distribution Statement for Joint Owners of Farmland Development Rights Agreements
5792
First-Time Home Buyer Savings Program
5803
Historic Preservation Tax Credit for Plans Approved after December 31, 2020
(e-file limited to four occurrences)
5889
Report of Oil, Gas, and Nonferrous Metallic Minerals Extraction – Income and Expenses
MI-1040
Individual Income Tax Return
MI-1040CR
Homestead Property Tax Credit Claim
MI-1040CR-2
Homestead Property Tax Credit Claim for Veterans and Blind People
MI-1040CR-5
Farmland Preservation Tax Credit Claim
MI-1040CR-7
Home Heating Credit Claim
MI-1040D
Adjustments of Capital Gains and Losses
MI-1040H
Schedule of Apportionment (e-file limited to six occurrences)
MI-2210
Underpayment of Estimated Income Tax
MI-4797
Adjustments of Gains and Losses from Sales of Business Property
MI-8949
Sales and Other Dispositions of Capital Assets
Schedule 1
Additions and Subtractions
Schedule MI-1045
Net Operating Loss
Schedule CR-5
Schedule of Taxes and Allocation to Each Agreement
Schedule NR
Nonresident and Part-Year Resident Schedule
5118
City of Detroit Resident Income Tax Return
5119
City of Detroit Nonresident Income Tax Return
5120
City of Detroit Part-Year Resident Income Tax Return
5121
City of Detroit Withholding Tax Schedule (City Schedule W)
5253
City of Detroit Withholding Tax Continuation Schedule
5338
City of Detroit Underpayment of Estimated Income Tax
Information from the W-2 and 1099 forms is entered in the software and transmitted with the e-file
return. Do not mail W-2 and/or 1099 forms to Treasury. All W-2 and 1099 information, when
applicable, is required when submitting a state unlinked return.
17
When the following forms are included, the MI-1040 can be e-filed, but the following forms must be
mailed to the address indicated on the form.
Form
Title
4*
Application for Extension of Time to File Michigan Tax Returns
MI-1310
Claim for Refund Due a Deceased Taxpayer
MI-1040ES*
Michigan Estimated Individual Income Tax Voucher
* If the taxpayer makes either the extension payment or estimated payments electronically,
using Michigan’s Individual Income Tax e-Payments System, there is no need to mail each
of the identified forms to Treasury.
Michigan will accept e-file returns for deceased taxpayers. If a U.S. 1310 is required, that data must be
included within the federal folder of the Michigan e-file return. When e-filing on behalf of a single,
deceased taxpayer, with a balance due federal return and a refund Michigan return, the Michigan
return can be e-filed and the U.S. 1310 or the MI-1310 (and required documents) included as a PDF
attachment when supported by the software or mailed to Treasury.
Following is a list of IIT forms, line references, and filing conditions where PDF attachments are
accepted by Michigan.
Form
Line
Description
File Name
Required
State Returns
Power of Attorney
POA.pdf
No
City Returns
Power of Attorney
CityPOA.pdf
No
All Returns
MI-1310
MI-1310.pdf
No
Letter of Authority
LetterOfAuthority.pdf
No
Death Certificate
DeathCertificate.pdf
No
All Forms and
Lines
Explanation. Must include the
form and line number reference.
Explanation.pdf
No
MI-1040
9d
Certificate of Stillbirth from
MDHHS.
CertificateOfStillbirth.pdf
Yes
MI-1040
18
Other State Returns
OtherStateReturn.pdf
No
MI-1040
Grantor Letter
GranterLtr.pdf
No
MI-1040
MI-1040CR-5
26
Worksheet to allow claimants to
identify percentages they can
claim for a farmland
preservation tax credit.
FarmlandK1.pdf
No
18
Form
Line
Description
File Name
Required
MI-1040
MI-1040CR-5
26
A breakdown of the taxable value and
property taxes for the farmland
preservation tax credit.
Assessor.pdf
No
MI-1040
29
Flow-Through Entity Tax Credit
Documentation
FTECreditDocumentation.pdf
Yes
MI-1040CR
MI-1040CR-2
MI-1040CR-5
10
10
Property Tax Statement
PropertyTaxStatement.pdf
No
MI-1040CR
MI-1040CR-2
MI-1040CR-7
22
21
24
Custodial Party End of
Year Statement
FEN851.pdf
No
MI-1040CR
Letter from the landlord stating the
portion of the monthly payment that
constitutes rent, or if not available, the
prorated share of property taxes.
SpecialHousingStmt.pdf
No
Schedule 1
Schedule NR
Business Activity Worksheet
BusinessActivity.pdf
No
Schedule 1
10
Supporting statement when claiming
subtraction for when income from U.S.
obligations exceeds $5,000
USObligationsDetail.pdf
No
Schedule 1
11
Claiming a subtraction of taxable railroad
retirement benefits. This can include
income from the RRB-1099 and/or RRB-
1099R.
RRB1099R.pdf
No
Schedule 1
22
Subtraction for Marihuana Business
Expenses
MRTMADocuments.pdf
Yes
Schedule 1
23
Claiming subtraction for federal Schedule
R but not required to include Schedule R
with federal return.
FedSchR.pdf
No
Schedule 1
26
Tier 3 Standard Deduction Worksheet
StandDedTier3Wksht.pdf
No
MI-1040H
13
Unitary Calculation
UnitaryCalculation.pdf
Yes
Schedule
MI-1045
5595
19
10E
NOL Worksheet
NOLWksht.pdf
No
5674
2 or 3
NOL Worksheet
NOLWksht.pdf
No
5674
2 or 3
Prior Year NOL Documents
PriorYrNOLDocuments.pdf
No
5792
Explanation of VARIOUS dates of
withdrawal
Explanation.pdf
Yes
5792
3
Account statements, real estate
settlement statement, and/or Form 1099
FirstTimeHomeBuyerDocuments.p
df
Yes
5803
4c
Certificate of Completed Rehabilitation
CertificateOfCompleteRehabilitatio
n.pdf
Yes
5803
5
Historical Credit Documentation
HistoricalCreditDocumentation.pdf
Yes
5889
5
17
Report of Oil, Gas, and Nonferrous
Metallic Minerals Extraction – Income
and Expenses
OilAndGasDocuments.pdf
No
5119
Part 5
Finance Director Approval Letter
ApprovalLetter.pdf
Yes
5121
Part 3
Employer Letter and Work Log
EmployerLetterAndWorkLog.pdf
No
5119
5120
28
23
Explanation. Employee Business Expenses
EmployeeBusinessExpenses.pdf
No
19
Software may include a “Preparer Notes” field for the federal, State, and/or City return. The purpose of
this field is to capture additional descriptive information from lines that did not have sufficient space.
Michigan Preparer Notes can contain up to 150 characters. Tax preparers are encouraged to utilize
Preparer Notes and PDF attachments when supported by the software.
Using Preparer Notes and including the recommended PDF attachments may reduce processing delays
and the need for Treasury to contact the taxpayer for additional information.
Examples of information that can be included in Preparer Notes and when a PDF attachment is
recommended:
• Combat Zone. If a taxpayer is serving in a combat zone.
• Federal Extension granted to MM-DD-YYYY. If a taxpayer has been granted an extension to file
their federal return.
• Explanation of a large subtraction. Recommend including an Explanation.pdf when not
supported by federal forms.
• Explanation of a miscellaneous subtraction. Recommend including an Explanation.pdf when not
supported by federal forms.
• Explanation of how expenses were met when total household resources are very low.
Recommend including an Explanation.pdf.
• Co-owners share of property taxes. Recommend including the PropertyTaxStatement.pdf.
• Explanation of taxpayers paying room and board/property tax credits. Recommend including
the SpecialHousingStmt.pdf.
• Farmland agreement number reduced for exception by percent. Recommend including
Assessor.pdf.
• Identify where prior year farmland refund is included on federal return. Recommend including
an explanation in Preparer Notes.
• Withholding corrected on an amended MI-1040. Recommend including Explanation.pdf and to
provide copies of the W-2(s).
The taxpayer is not eligible for e-file for tax year 2023 if:
Form
Line
Description
Various
Filing federal returns or forms excluded from MeF.
All Michigan forms
Prior year return(s) for tax year 2020 or prior.
MI-1040
19
Filing a return that includes both Form 5803 and
3581
20
Form
Line
Description
Schedule 1
25
Claiming the Tier 2 Standard Deduction and has
received benefits from SSA exempt employment,
has retired as of January 1, 2013, and was born
January 1, 1956.
Schedule 1
25
26
28
Claiming both the Michigan Standard Deduction (line 25 or line
26) and the dividend/interest/capital gain deduction (line 28) as
the unremarried surviving spouse of someone born before 1946
who was at least 65 at the time of death.
Filing and claiming the Tier 3 Michigan Standard Deduction on
line 26 with a birthdate of January 1, 1957.
Schedule 1
27
Claiming a pension/retirement subtraction using Form 4884
when the oldest of filer or spouse was born in 1956 and died
during the tax year before reaching age 67.
Claiming a pension/retirement subtraction using Section C of
Form 4884 when the oldest of the filer or spouse was born
January 1, 1962.
MI-1040CR, CR-2 or MI-1040CR-7
Filing an amended credit-only return.
MI-1040CR
38
39
41
Claiming the Homestead Property Tax credit on the MI-1040CR,
needing to prorate the maximum credit limit due to being
deceased, and having fewer “days of occupancy” than the
number of days the taxpayer lived during the tax year.
MI-1040CR-5
8
Using different total household resources than on the
MI-1040CR, MI-1040CR-2 or MI-1040CR-7.
MI-1040CR-7
13b
Claiming more Deaf/Disabled/Blind exemptions than the total
personal, child and dependent adult exemptions.
MI-8949
1
Filing with more than 36 short-term capital gains/losses.
3
Filing with more than 48 long-term capital gains/losses.
MI-4797
2
Filing with more than 16 sales/exchanges of property held more
than one year.
10
Filing with more than 13 ordinary gains/losses of property held
one year or less.
MI-4797
19
Filing with more than 17 gains from disposition of property
under Sections 1245, 1250, 1252, 1254 and 1255.
5595
Claiming more than 300 Business Entities on Form 5595.
MI-1040H
13
Filing with more than 28 entities unitary with one another for
which apportionment is being combined.
5792
Filing with more than six entries on Form 5792
5121
Part 2
Reporting City Tax Paid by a Partnership.
21
Nonelectronic Portion of Michigan Returns
The nonelectronic portion of the Michigan return consists of the following supporting documents:
• Michigan Individual Income Tax Certification for e-file (Form MI-8453). See the “Michigan E-file
Signature Process” section for more information on Form MI-8453.
• Michigan Individual Income Tax Payment Voucher (Form MI-1040-V). State tax due returns
must submit payment by the due date.
• City Income Tax e-file Payment Voucher (Form City-V). City tax due returns must submit
payment by the due date or extended due date if filing an Application for Extension of Time to
File City Tax Returns (Form 5029). Form City-V should only be used for e-file payments. For
other payment options see the “Tax Refund and Payment Information” section.
• Michigan Direct Debit of Individual Income Tax (Form 5472). Provides the taxpayer with a copy
of their direct debit request entered in the electronic return submission.
• Signed Distribution Statement for Joint Owners of Farmland Development Rights Agreements
(Form 5678). Used for farmland returns claiming unequal distribution of property taxes on
jointly owned land and must be signed by all owners. Do not mail a copy of Form 5678 or the
signed statement to Treasury. A copy of the signed statement should be retained to avoid
reduction and/or denial of the credit. Treasury may later request a copy of the signed
statement to verify the unequal distribution claimed.
Michigan E-file Signature Process
For Fed/State Returns
When e-filing the federal and Michigan returns together, Michigan will accept the federal signature
(PIN).
For State and/or City of Detroit Unlinked Returns
When e-filing a State and/or City of Detroit unlinked (standalone) return, the filer must sign the return
with the Electronic Signature Alternative (ESA) or paper Form MI-8453. The ESA consists of the SSNs,
previous year’s Adjusted Gross Income (AGI) or total household resources, and the previous year’s tax
due or refund amount.
The AGI or total household resources and refund or tax due amount must be from the previous year’s
return. Treasury can accept this information from the original return, amended return, or return as
corrected by Treasury.
If the return is signed using the ESA and the return is rejected because the ESA does not match, the
taxpayer/tax preparer may correct the ESA information and retransmit. There is no limit on how many
times the return can be retransmitted in this circumstance.
22
Do not send Form MI-8453 to Treasury unless requested to do so.
For Tax Preparers
When e-filing a State and/or City unlinked (standalone) return, Form MI-8453 is used to capture the
paid preparer (as defined by Internal Revenue Code (IRC) § 7701) signature and as a preparer
certification document to be retained in their records. Part 3 of Form MI-8453 must contain the paid
preparer’s signature and date to be used for this purpose.
Volunteer Groups
If the taxpayer chooses to complete Form MI-8453, it should not be mailed to Treasury. Volunteer tax
preparers should provide taxpayers with form MI-8453 and instruct them to retain a copy with their
tax records.
Assistance is available using TTY through the Michigan Relay Service by calling 711. Printed material in
an alternative format may be obtained by calling 517-636-4486.
TAX REFUND AND PAYMENT INFORMATION
STATE RETURNS
State Tax Returns Claiming Refunds
Michigan taxpayers can elect to have their Michigan income tax refunds directly deposited into their
checking or savings accounts. When carrying the direct deposit information from the federal return to
the Michigan return, verify the information is correct for the Michigan return. This is especially
important when taxpayers have a Refund Anticipation Loan and have designated their federal refund
to pay their loans. The State refund should not go to pay those loans.
Direct deposit is only available when Treasury is issuing a state refund and only on the first return filed
each year. The Home Heating Credit Program sends the credit in the form of an Energy Draft directly to
the energy provider or to the claimant. Only a claimant whose heat is included in rent should use Direct
Deposit of Refund (Form 3174).
Direct deposit requests associated with a foreign bank account are classified as International
Automated Clearing House Transactions. If the income tax refund direct deposit is forwarded or
transferred to a financial institution in a foreign country, the direct deposit will be returned to
Treasury. If this occurs, the refund will be converted to a check (warrant) and mailed to the address on
the tax return. Taxpayers should contact their financial institutions for questions regarding the status
of their bank account.
Treasury cannot make any changes to direct deposit information after the return is transmitted.
Refund requests cannot be made by direct deposit for an amended return. A refund check will be
mailed to the address on the Michigan return.
23
State Tax Returns with Tax Due
In the event that tax is due on the return, the taxpayer must submit payment by April 15, 2024. If full
payment of that tax due is not submitted by April 15, the taxpayer will receive a bill with applicable
penalty and interest.
Payments can be made by:
• Direct Debit: Direct debit from a checking or savings account when the return is e-filed and
supported by the software. A direct debit is a tax payment electronically withdrawn from the
taxpayer’s bank account through the tax software used to electronically file the IIT return.
Submitting the electronic return with the direct debit information provided, acts as the
taxpayer’s authorization to withdraw the funds from their bank account. Requesting the direct
payment is voluntary and only applies to the electronic return that is being filed.
Important: When the State return has tax due and the City return has a refund, the City refund
cannot be reduced to cover the State tax due.
Direct debit will not be available for the Michigan 2023 amended tax due return. Payment for
an e-filed 2023 Michigan amended tax due return should be made using the Individual Income
Tax Payment Voucher (MI-1040-V).
• Warehousing a payment. Warehousing a tax payment allows the taxpayer to designate the
date the payment will be withdrawn from their bank account. Treasury will accept a
warehoused payment date up to 90 calendar days before, but not beyond, April 15, 2024.
Direct debit requests after the April 15, 2024, due date cannot be warehoused and must
contain a direct debt date that is equal to the transmission date of the e-filed return. Treasury
will not withdraw a payment from the designated bank account prior to the requested debit
date. Allow three to four business days from the direct debit date of the payment for the funds
to be withdrawn from the account.
Penalty and interest will accrue on any tax due that has not been paid by the due date of the
return. The day the return was transmitted, if accepted by Michigan, is the received date.
• Mailing Form MI-1040-V with a check or money order after e-filing the MI-1040 return. The
MI-1040-V should not be included with a copy of the return and should not be used for any
other payments made to the State of Michigan (SOM) (such as a City of Detroit tax due). When
the payment is made electronically, there is no need to mail the MI-1040-V to Treasury.
• Michigan IIT e-Payments system by direct debit (eCheck) from a checking or savings account,
or by using a credit or debit card. Michigan IIT filers have the option of making payments
electronically using IIT e-Payments system. Paying electronically is easy, fast, and secure. The
available payment types include IIT payments (tax due on the MI-1040), quarterly estimated
income tax payments, and IIT extension payments. Payments can be made using eCheck from a
checking or savings account, or credit or debit card. There is no fee for eCheck payments.
Credit and debit payments will be charged a convenience fee of 2.35 percent of the total
payment for credit cards and a flat fee of $3.95 for debit cards, which is paid directly to the
24
payment processing vendor. Visit www.michigan.gov/iit for more information.
CITY OF DETROIT RETURNS
City of Detroit Tax Returns Claiming Refunds
Direct deposit will not be available for City of Detroit refunds. All City of Detroit tax refunds will be
issued checks and mailed to the address on the return.
City of Detroit Tax Returns with Tax Due
In the event that tax is due on the return, the taxpayer must submit payment by April 15, 2024. If full
payment of that tax due is not submitted by April 15, the taxpayer will receive a bill with applicable
penalty and interest. Payment using Michigan’s Individual Income Tax e-Payments system is not
available for City of Detroit tax due returns.
Payments can be made by:
• Direct Debit for tax year 2020, 2021, 2022 and 2023: Direct debit from a checking or savings
account when the return is e-filed and supported by the software. A direct debit is a tax
payment electronically withdrawn from the taxpayer’s bank account through the tax software
used to electronically file the IIT return. Submitting the electronic return with the direct debit
information provided acts as the taxpayer’s authorization to withdraw the funds from their
bank account. Requesting the direct payment is voluntary and only applies to the electronic
return that is being filed.
Important: When the City of Detroit return has a tax due and the State return has a refund,
the State refund cannot be reduced to cover the City tax due.
Warehousing a payment. Warehousing a tax payment allows the taxpayer to designate the
date the payment will be withdrawn from their bank account. Treasury will accept a
warehoused payment date up to 90 calendar days before, but not beyond, April 15, 2024.
Direct debit requests after the April 15, 2024, due date cannot be warehoused and must
contain a direct debit date that is equal to the transmission date of the e-filed return. Treasury
will not withdraw a payment from the designated bank account prior to the requested debit
date. Allow three to four business days from the direct debit date of the payment for the funds
to be withdrawn from the account.
Penalty and interest will accrue on any tax due that has not been paid by the due date of the
return. The day the return was transmitted, if accepted by Michigan, is the received date.
• Mailing the Income Tax e-file Payment Voucher (City-V) with a check or money order after e-
filing the City of Detroit return. The City-V should not be included with a copy of the return
and should not be used for any other payment made to the SOM (such as a Michigan tax due on
Form MI-1040). When the payment is made electronically, there is no need to mail the City-V
to Treasury.
FOR MORE INFORMATION
25
Visit the federal website at www.irs.gov and Michigan website at www.MIfastfile.org for more
information on the Fed/State e-file Program.
Assistance is available using TTY through the Michigan Relay Service by calling 711. Printed material in
an alternative format may be obtained by calling 517-636-4486.
POST-FILING INFORMATION
MAILING ADDRESSES
General income tax correspondence or returning a home heating draft for a check:
Michigan Department of Treasury
Customer Contact
P.O. Box 30757
Lansing, MI 48909
Write “Void” across the draft and include a letter of explanation. When returning home heat drafts,
the dollar amount of the check may be 50 percent of the returned draft and there will be further
review of the account.
Returning State of Michigan checks:
Michigan Department of Treasury
Office of Financial Services
P.O. Box 30788
Lansing, MI 48909
Write “Void” across the check and include a letter of explanation.
Visit www.michigan.gov/treasury for more information.
AMENDED MICHIGAN INCOME TAX RETURNS (SCHEDULE AMD)
To correct or amend information reported on an Individual Income Tax Return (Form MI-1040), check
the “Amended” box at the top of page 1 of the form. A Schedule AMD and applicable supporting
documentation must be included when the amended MI-1040 is filed.
If the original return was adjusted by Treasury and the taxpayer disagrees with the adjustments, it is
not necessary to file an amended return. Simply respond to the adjustment notice with documentation
to support the original claim. Treasury will review the documentation for further adjustment.
26
Exceptions:
• When correcting a Homestead Property Tax Credit (Form MI-1040CR) and no Form MI-1040 was
filed with the original claim, a MI-1040X-12 or MI-1040X are not required. File the Form MI-
1040CR using the corrected figures and check the “Amended” box at the top of the form.
• When correcting a Home Heating Credit (Form MI-1040CR-7), file a MI-1040CR-7 and check the
“Amended” box at the top of the form. An amended claim requesting an additional Home
Heating Credit must be submitted by September 30, following the year of the claim.
• When correcting a Farmland Preservation Tax Credit Claim (Form MI-1040CR-5), file a MI-
1040CR-5 with a new MI-1040 and check the “Amended” box at the top of the form. Submit the
amended form along with a description and any documentation needed to explain the change.
• When claiming a refund from a Michigan net operating loss (NOL) carryback, do not file an
amended return. To request a refund from a farming loss carryback, file Farming Loss Carryback
Refund Request (Form 5603).
• An amended return is not required to change an incorrect SSN or incorrect mailing address.
Contact Treasury at www.michigan.gov/iit or call 517-636-4486.
An amended return claiming an additional refund must be filed within four years of the due date of
the original return.
CUSTOMER SELF-SERVICE
Treasury’s suite of web systems, eServices, offer easily accessible and fast ways for taxpayers and
authorized representatives to get information about taxpayer accounts and ask account-specific or
general questions.
Treasury must protect sensitive taxpayer information. Therefore, to access privileged taxpayer records
electronically, customers must answer shared secret questions. These questions are based on tax
return data filed or certified by the taxpayer that is on file with Treasury. To answer the shared secret
questions successfully, have the following information available for the tax year of your inquiry:
• Primary filer’s Social Security Number (SSN)
• Primary filer’s last name
• Tax year
• Filing status
• Adjusted Gross Income (AGI)/Total Household Resources (THR)
For phone access to IIT account information, call 517-636-4486.
IIT eService
Treasury’s IIT eService is a web platform used by the taxpayer to check refund status, view tax
account information, ask questions, and more. The IIT eService is specific to individual income tax
and used by the taxpayer. You can access IIT eService at etreas.michigan.gov/iit.
27
Taxpayers can interact with Treasury through the IIT eService in 3 ways:
• Guest Services
The Guest Services portal provides secure access to a Treasury tax account through easy-
to-use self-service options:
▪ Where’s My Refund?
▪ Change My Address
▪ View Estimated Tax Payments, and
▪ Penalty and Interest Calculator.
Guest Services are transactional, meaning each time a taxpayer needs information, they
must provide answers to the shared secret questions.
• Account Services
The Account Services portal offers access to all the Guest Services functionality in one
place. The advantage of using Account Services is a taxpayer only needs to answer the
shared secret questions for a tax year one time, instead of each time they need information
about their Treasury tax account. An added feature of Account Services is the ability to
view Treasury-issued notices by uploading documentation.
• Inquiries
The Inquiries portal establishes an electronic communication pathway with Treasury. A
taxpayer can ask general or account-specific questions, retrieve and review answers to
their questions, and request copies of correspondence.
Tax Professionals eService
The Tax Professionals eService is a web platform used by the service providers (bookkeepers,
CPAs, payroll professionals, tax preparers, etc.) to interact with Treasury on behalf of themselves
or their clients. You can access the Tax Professionals eService at etreas.michigan.gov/tp.
Tax Professionals can interact with Treasury through easy-to-use self-service options, organized
by the following categories:
• Individual Income Tax
• Sales, Use and Withholding Taxes,
• Michigan Business Tax/Corporate Income Tax
• Flow-through Entity Tax, and
• General Questions
Service providers making account-specific inquiries through the tax-specific portals on Tax
Professionals eService will be required to answer shared secret questions and provide contact
information for themselves. In addition, service providers should have an Authorized
Representative Declaration/Power of Attorney form (POA/ARD, Form 151) on file with Treasury
or be the authorized preparer on the tax return of record. This documentation permits Treasury to
disclose protected information, yielding a helpful and timely response to the tax professional.
Service providers making general inquiries through the self-service option on Tax Professionals
eService will not be required to answer shared secret questions but will be required to provide
contact information for themselves. Because these types of inquiries are not tied to a specific
28
taxpayer account, no expressed or implied consent is needed to use this functionality and receive a
response.
Common IIT Terms
You may encounter the following terms referenced in written correspondence or electronic format.
Current Tax Year: The current tax year is 2023.
Date Processed: The date Treasury posted the return to its computer system. This does not
indicate the return has been completed.
Completed: Treasury has completed processing the return. The transaction screen will indicate what
the taxpayer can expect from Treasury. This includes refund information and whether a
refund was direct deposited, applied as a credit to the following year, or offset and applied to a
debt.
Issued: A check or direct deposit has been issued. Please allow ten to fourteen business days for mail
to be received. Direct deposits can take up to five days from the completed date to post to the
identified account. Verify the refund amount is the amount Treasury has indicated. If the refund
amount is not in the account after five days, the taxpayer should contact their financial institution. If
there is a problem with the direct deposit, Treasury will normally issue a refund check.
Manual or Pending Review: By law (Michigan Compiled Law (MCL) 205.28(1)(f)), Treasury
cannot disclose to anyone why a return has been selected for manual review. Treasury has
established procedures for selecting returns for manual review both to protect taxpayers and to
ensure appropriate amounts are being refunded. If a taxpayer’s return has been selected for review,
additional time for processing is required.
Pending Response: Treasury is unable to complete the return without additional information from the
taxpayer. It could take an additional 12 weeks from the date a response is received by Treasury for the
return to be completed. If more than 12 weeks have passed, send an inquiry through eServices.
State Debt or Third-Party Debt: If Treasury indicates a refund was used to pay a “State debt or
third-party debt,” it could take three to four months (depending on the type of debt) for the refund
amount to be applied to the debt. The message on eServices will provide taxpayers with a
phone number to call and they will also receive a letter.
Emergency Refunds or Hardship Cases: Taxpayers requesting an expedited refund due to a
hardship situation must provide documentation of foreclosure, eviction, or utility shutoff with their
requests.
Why eServices Might Indicate Treasury Has Not Received an Income Tax Return
EServices may indicate an Income Tax return has not been received due to the following reasons:
• SSN provided may not match Treasury records.
• Taxpayer filed an amended return. Amended returns are reviewed late in the year; they should
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be entered into Treasury’s computer system within eight weeks of receipt.
• Taxpayer’s information is in the process of being posted. The system is updated once every
business day. It is possible to call on Monday and find no record of a taxpayer’s return and then
call on Tuesday and learn the return posted overnight.
• It can take eight weeks for paper return information to be entered into Treasury’s computer
system. If the website or Customer Contact number does not state a return has been received
ten weeks after the return was mailed, contact eServices.
Note: Timelines are approximate.
Telephone Options
Call Treasury at 517-636-4486 to reach the automated response system. Entering the required
information activates the automated response system.
The automated response system provides the current processing date and promotes self-service on
the Web. The following options available on the automated response system include:
▪ Current year status - The customer enters an SSN and AGI or THR depending on the form(s)
filed. The automated response system provides the following status information:
− Current processing date
− Completed date
− The status of the refund
− Date of Pending review of return
− No record of return
− The SSN or other information entered may not match Treasury records.
▪ Estimated payments - Enter the tax year designated on the estimated payment, AGI from the
previous year, and the SSN. The automated response system provides payment amount(s) and
date(s), credit forward amount and date, no payments on file, or a Customer Service
Representative.
▪ Prior year information - Enter the SSN, AGI or THR, and tax year in question. The automated
response system provides the following status information:
− Completed date
− The status of the refund
− Pending review date
− No record of return
− The SSN or other information entered may not match Treasury records.
− Status of correspondence sent to Treasury, inquire about a bill or tax preparation, or
other information.
− Request tax forms and instructions.
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Changes on the Return
If corrections must be made after the return has been accepted and acknowledged, the taxpayer must
e-file or mail an amended MI-1040 with Schedule AMD.
Contact Information
Michigan e-file publications are available on Treasury’s website at www.MIfastfile.org. For questions
about the e-file program, contact Forms, Documentation and E-file Services at:
Email: [email protected]
This contact information is for tax preparers and software developers only and enables Treasury to
provide better service to authorized e-file providers. The Forms, Documentation and E-file Services
staff are unable to provide return status information or address specific taxpayer account issues.
Tax Preparer Resources
Visit Treasury’s website at www.MIfastfile.org for more information on Michigan’s Electronic Filing
Program which includes:
• Available documents: Individual Income Tax Handbook and Individual Income Tax (including
City of Detroit) E-File Business Rules. Go to Treasury’s website at www.MIfastfile.org, click on
Tax Preparer, and scroll down to the current tax year links.
• Frequently asked questions. This provides answers to many questions by topics and if
applicable, available links to websites for additional information. Go to Treasury’s website at
www.michigan.gov/taxes and click on Frequently Asked Questions at the top of the website.
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CHAPTER 2 – MICHIGAN INCOME TAX (FORM MI-1040)
GENERAL INFORMATION
MI-1040
This chapter will follow the MI-1040 “instructions.” This refers to the instruction booklet used to
prepare Form MI-1040. Read the instruction booklet. The following information will recap and/or
further explain the instructions in the booklet.
FILING REQUIREMENTS
An individual who is a Michigan resident for all or part of the tax year is required to file a
Michigan income tax return if any of the following are true:
1. Michigan income tax is due
2. The taxpayer is due a refund
3. A federal return is required
4. The AGI is greater than the personal exemption allowance on a Michigan Income Tax return.
For tax year 2023, a resident taxpayer is allowed $5,400 for each personal exemption.
Anyone eligible to be claimed as a dependent on someone else’s return may claim a $1,500 exemption
($3,000 on a joint return). This is true whether or not the other person claims the exemption.
To prepare a Michigan income tax return, you must have a copy of the taxpayer’s federal income tax
return (U.S 1040, 1040-SR or 1040-NR). The U.S. 1040 contains information needed to prepare a
Michigan income tax return.
Taxpayers who file any of the following schedules or forms with their federal return must attach a
copy to their Michigan income tax return and designate the location of any business activity or the
location of any real property involved.
Schedule 1 Additional income and adjustments to income
Schedule A Itemized Deductions
Schedule B Interest and dividend income (if over $5,000)
Schedule C Profit or loss from business
Schedule D and Form 4797 Capital and ordinary gains and losses (copies of U.S. Forms 1040
Schedule D and 4797 are required if taxpayer is filing Forms MI-
1040D and MI-4797)
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Schedule E Supplemental income and loss (losses from rents, royalties,
partnerships, estates and trusts, and S corporations)
Schedule F Profit or loss from farming
Schedule R Credit for the elderly or the disabled
Form 2555 Foreign earned income
Form 3903 Moving expenses (applicable for military personnel only)
Form 4868 Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return
From 6198 Computation of deductible loss from an activity described in
Internal Revenue Code (IRC) Section 465(c)
Form 8829 Expenses for business use of home
Form 8949 Sales and other Dispositions of Capital Assets
DUE DATE OF RETURN
Income tax returns are due on the 15th day of the fourth month following the close of the taxpayer’s
calendar or fiscal tax year. If the due date falls on a weekend or a holiday, the next business day will
be considered the due date. The due date for 2023 income tax returns will be April 15, 2024.
EXTENSION
If a taxpayer submits a valid extension of time to file a federal income tax return, attach a copy of U.S.
Form 4868 if filed by paper or the acknowledgement or confirmation received from IRS if filed
electronically to Form MI-1040. Treasury will extend the due date to the new federal due date.
If a taxpayer does not have a federal extension, complete Application for Extension of Time to File
Michigan Tax Returns (Form 4) with the payment of tax due. Upon receipt of Form 4, Treasury will
grant an automatic extension of time to file.
The taxpayer will not receive any notification of approval of a request for an extension.
An extension allows a taxpayer to file later than April 15, 2024. It does not allow a taxpayer to pay the
tax later. If the tax is not paid by April 15, 2024, appropriate penalty and interest will be charged.
It is generally not necessary to file an extension request if claiming a refund as a refund can be claimed
up to 4 years from the due date of the return.
United States military personnel serving in a combat zone on April 15, 2024, will be given 180 days
after leaving the combat zone to file their federal and State returns and will be exempt from penalties
and interest. Service men and women serving in combat zones should write “Combat Zone” in ink on
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the top of page 1 of their return. For e-file returns, enter the word “Combat Zone” in the preparer
notes or follow other direction as supplied by the tax software company.
An extension of time to file is not an extension of time to pay. An extension application will not be
processed unless a payment is included, or estimated payments have been made and are listed on the
form.
IDENTIFICATION SECTION
Enter taxpayer’s:
• Name, if single, and spouse’s name, if married filing jointly or separately
• Current mailing address. If the taxpayer changes their address after filing a return/claim, the
taxpayer should notify Treasury of the change of address by using self-service or in writing by
mail.
SOCIAL SECURITY NUMBER(S)
Ask to see taxpayer’s Social Security (SS) card(s). It is important to enter the taxpayer’s correct SS
Number (SSN). If the claimant is married filing jointly or married filing separately, both SSNs must be
included on the form.
SCHOOL DISTRICT CODE
Obtain the code number from the MI-1040 instruction booklet.
For residents, enter the school district code for where the taxpayer lived on December 31, 2023. For
nonresidents and for part-year residents who did not live in Michigan as of December 31, 2023, enter
“10000” in the school district code box.
STATE CAMPAIGN FUND
A taxpayer and/or spouse may designate $3 of their taxes to go to the State campaign fund. This
decision will not increase the tax liability or reduce the refund.
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FILING STATUS
The filing status used on Form MI-1040 must be the same as the filing status used for the federal
return, with one exception: taxpayers who file “married filing separately” for federal purposes may file
either “married filing jointly” or “married filing separately” on the Michigan return.
Federal Status State Status
Single Single
Head of Household Single
Qualifying Widow(er) Single
Married, Joint Married, Joint
Married, Separate Married, Separate or
Married, Joint
RESIDENCY STATUS
Check box a, b, or c. If one spouse is a resident and the other spouse a nonresident or part-year
resident, check the appropriate box for each spouse. If the taxpayer (or spouse) is a part-year resident
for the tax year or a nonresident, Schedule NR must be completed.
a. Resident. An individual is a Michigan resident if Michigan is their permanent home. A
permanent home is the place an individual intends to return to whenever they go away.
b. Nonresident. An individual whose permanent home is not in Michigan. A nonresident must file
a Michigan return if any income is attributable to Michigan. Some examples are wages earned
in Michigan or income received from a business activity located in Michigan.
c. Part-Year Resident. An individual who moved in or out of Michigan during the year. A
temporary absence from Michigan, such as spending the winter in a southern state, does not
make the taxpayer a part-year resident. A taxpayer is a part-year resident only if they moved
their permanent home into or out of Michigan.
A taxpayer filing as a nonresident, or part-year resident must:
1. Complete Schedule NR and attach it to Form MI-1040 allocating all items of AGI between the
states. (Attach appropriate schedules verifying adjustments.)
2. Prorate the exemption allowance by dividing Michigan income by total income.
Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin
that exempt nonresidents from income taxes imposed by each state on salaries, wages, and other
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employee compensation. Michigan residents pay only Michigan income tax on salaries and wages
earned in these states. This exemption does not apply to business income.
A resident of a reciprocal state who earned wages in Michigan must file Form MI-1040 along with the
Schedule NR and other applicable forms or schedules to receive a refund of Michigan tax withheld. Be
sure to indicate the taxpayer’s state of residence.
NONRESIDENT ALIENS
Nonresident aliens must file a Michigan income tax return if their federal AGI is more than their
Michigan exemption allowance. A copy of federal form U.S. 1040-NR, including all schedules and
worksheets, must be included with the MI-1040. An MI-1040 can be e-filed with a nonresident alien
U.S. 1040-NR return if supported by the tax software program. Wages or other income received by a
nonresident alien working in Michigan are subject to the Michigan income tax as provided for in
Michigan Compiled Laws (MCL) 206.110(2). However, due to tax treaty considerations between the
U.S. and other countries, wages and other income received by a nonresident alien living and working in
Michigan may not be subject to the Michigan income tax if the income is excluded from AGI.
A nonresident alien is not domiciled in Michigan and, therefore, may not claim a homestead property
tax credit or a home heating credit.
EXEMPTIONS
The following are the exemption allowances for 2023:
• $5,400 for each personal exemption of taxpayer. Each taxpayer may claim one personal
exemption. However, if a joint return is not filed, the taxpayer may claim a personal exemption
for the spouse if the spouse does not have any gross income and is not the dependent of
another taxpayer.
• $5,400 for each individual who is a dependent of the taxpayer.
• $5,400 for a parent of a stillborn delivered during 2023 who has been issued a Certification of
Stillbirth from the Michigan Department of Health and Human Services (MDHHS).
• An additional $3,100 for each Michigan special exemption.
• A $400 deduction for each taxpayer and every dependent of the taxpayer who is a qualified
disabled veteran, defined as a veteran of the active military, naval, marine, coast guard, or air
service who received an honorable or general discharge and has a disability incurred or
aggravated in the line of duty as described in 38 U.S.C. 101(16) of the U.S. Code.
• $1,500 for a taxpayer who is single or married filing separately ($3,000 if married filing jointly)
and can be claimed as a dependent on someone else’s return.
NOTE: Part-year residents and nonresidents must prorate the exemption allowance using
Schedule NR.
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Definitions of Michigan Special Exemptions
Taxpayers who have one or more of the impairments described below may claim a special exemption.
If the taxpayer’s dependent is eligible for a special exemption, only the taxpayer or the dependent may
claim that exemption, not both.
A special exemption may be claimed for the taxpayer, spouse, and each dependent of the taxpayer
who are in any of the following categories:
• Deaf. An individual whose hearing is totally impaired or whose hearing, with or without
amplification, is so seriously impaired that the primary means of receiving spoken language is
through other sensory input, including but not limited to lip reading, sign language, finger
spelling, or reading.
• Blind. An individual who has a permanent impairment of both eyes of the following status:
central visual acuity of 20/200 or less in the better eye with corrective glasses, or central visual
acuity of more than 20/200 if there is a field defect in which the peripheral field has contracted
to such an extent that the widest diameter of visual field subtends an angular distance of not
greater than 20 degrees in the better eye.
• Hemiplegic. An individual who has paralysis of one side of the body.
• Paraplegic. An individual who has paralysis of the lower half of the body.
• Quadriplegic. An individual who has paralysis of both arms and both legs.
• Totally and permanently disabled. An individual who is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which
can be expected to result in death, or which has lasted or can be expected to last for a
continuous period of not less than 12 months. Do not claim totally and permanently disabled if
the taxpayer is age 66 or older by June 30, 2023.
Support for this exemption is the receipt of any of the following types of income:
− Social Security Disability benefits
− Supplemental Security Income (SSI) disability benefits
− Veterans’ Administration disability retirement payments.
A taxpayer who does not receive any of the above income may be required to furnish a
physician’s statement to certify total and permanent disability. For an additional reference
see 42 U.S.C. 416 of the U.S. Code.
NOTE: An exemption for totally and permanently disabled cannot be claimed for a claimant,
spouse, or dependent who is 66 years of age or older by June 30, 2023.
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ADJUSTED GROSS INCOME
Enter the adjusted gross income (AGI) from the U.S. Form 1040.
ADDITIONS TO ADJUSTED GROSS INCOME
The following are the most common additions and must be entered on Michigan Schedule 1, totaled,
and carried to Form MI-1040:
• Interest and dividends from obligations or securities of states other than Michigan and their
political subdivisions
• Taxes on or measured by income (e.g., deduction for self-employment tax)
• Losses from out-of-state businesses, partnerships, and S corporations
• Losses from out-of-state rental of real property
• Out-of-state farm losses
• Net loss from federal column of Form MI-1040D or MI-4797
• Losses from the sale or exchange of U.S. obligations to the extent used in arriving at AGI
• Refund received from the termination of a Michigan Education Trust (MET) contract
• An unqualified withdrawal from education savings accounts under the Michigan Education
Savings Program (MESP) Act if the amount was not included in AGI
• Michigan portion of gain from Form MI-1040D or MI-4797
• Federal net operating loss deduction used to reduce AGI
SUBTRACTIONS FROM ADJUSTED GROSS INCOME
The following are the most common allowable subtractions and must be entered on Michigan
Schedule 1, totaled, and carried to Form MI-1040. Subtractions are limited to the extent included in
AGI.
• Income from U.S. government obligations reduced by any expenses in carrying the obligation
used in arriving at AGI
• Compensation and retirement benefits received for services in the U.S. Armed Forces to the
extent included in AGI (Do not deduct compensation received from the U.S. Public Health
Service)
• Pension/retirement benefits received from the service in Michigan National Guard to the extent
included in AGI
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• Pension/retirement benefits received under the Railroad Retirement Act of 1974 to the extent
included in AGI
• Capital gain adjustments (from federal column of MI-1040D or MI-4797)
• Income from business or property located in another state
• Retirement/pension benefits. (Caution: subtractions of these benefits may be limited and are
discussed in detail in a separate section on Pension and Retirement Benefits)
• Dividend/interest/capital gains deduction for senior citizens (Caution: this subtraction is not
available for individuals born after 1945)
• Social Security (SS) benefits to the extent included in AGI
• Income earned while a resident of a Renaissance Zone that was certified or renewed before
January 1, 2012
• Contributions to the MESP, MiABLE, or First-Time Homebuyer’s Savings Account, not to exceed
$5,000 for a single return or $10,000 for a joint return per year
• The amount of an advance payment under a MET contract during the tax year
• Michigan state and local income tax refunds to the extent included in AGI
• Michigan homestead property tax credit to the extent included in AGI
Items not allowed as a subtraction:
• Wages, salaries, and personal compensation earned by a resident or earned in Michigan by a
nonresident, unless the individual is a resident of a reciprocal state
• Pensions, if the taxpayer did not meet the minimum requirements for receiving the pension
benefits under the terms of the plan (see the detailed information that follows)
• Distributions from IRAs before the age of 59 ½, unless the taxpayer meets the guidelines of IRC
72(t)(2)(A)(iv)
• Distributions from deferred compensation plans
• Unemployment benefits included in AGI
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• Sick pay, disability benefits, and wage continuation benefits paid to a taxpayer by their
employer or by an insurance company under contract with the employer (disability benefits are
not from wage continuation plans)
• Stock purchase plans that do not qualify as pension plans under the IRC
• IRA, Keogh contributions (these are subtracted in arriving at AGI)
• Lottery winnings
• Out-of-state gambling winnings taxed by another state (a credit for taxes paid may be
available), not applicable to nonresidents
PENSION AND RETIREMENT BENEFTIS INFORMATION
GENERAL INFORMATION
NOTE: Form 4884, Michigan Pension Schedule, is required to support a pension subtraction.
For purposes of this section, the term “pension” will include retirement and pension benefits.
A subtraction may be allowed on the Michigan return for qualifying distributions from pension plans.
Pension plans include private and public employer plans, and individual accounts governed by various
sections of the IRC.
The pension subtraction involves two steps:
• First, the pension distribution must meet certain requirements to be characterized as a
qualified distribution.
• Second, a qualified distribution may be subject to a dollar limitation on the amount of the
subtraction.
Step 1: Qualified Distribution Requirements
Employer plans and individual plans each have rules for receiving pension distributions. For a pension
distribution to qualify for the Michigan subtraction, it must comply with the specific distribution rules
under its plan.
EMPLOYER PLANS
Employer plans are created by private companies and by public entities. The employer plan establishes
the rules that govern retirement age and the pension formula for their employees. For both public and
private employer plans, an employee must retire under the provisions of the plan, the pension benefits
must be paid from a pension trust fund, and the payment must be made to either the employee or the
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surviving spouse. (Payments made to the surviving spouse are only deductible if the employee
qualified for the subtraction at the time of death.)
Although traditional employer plans are defined contribution and defined benefit plans, many
employers use 401(k) or 403(b) plans that incorporate employee match provisions.
Distributions from a 401(k) or 403(b) plan are qualified distributions to the extent that they are
attributable to the employer’s contributions or employee’s contributions that were mandated by the
plan. An employee’s contribution required by the plan to elicit an employer match is considered
mandated. Amounts distributed from a 401(k) or 403(b) plan that allows the employee to set the
amount of compensation to be deferred and does not prescribe retirement age or years of service do
not qualify as pension benefits.
INDIVIDUAL PLANS
Individuals may also have pension accounts created under various sections of the IRC that may or may
not be part of an employer plan. To qualify for the Michigan pension subtraction, the distributions
must meet the requirements set forth in the relevant section of the IRC.
Individual Retirement Account (IRA) IRC 408 Distribution Requirements
1. 59½ or older, or
2. Disability, or
3. Death - Distributions after the death of the participant may only be subtracted by a surviving
spouse, and only if the distributions qualified as a subtraction for the participant at the time of
death; or
4. Series of equal periodic payments made for life under IRC 72(t)(2)(A)(iv).
Distributions from a Roth IRA are not included in AGI and are not subtractable on the Michigan return.
Senior Citizen Annuity IRC 72 Distribution Requirements
1. Received from a retirement annuity policy, and
2. For life, and
3. To a senior citizen.
For purposes of the retirement annuity subtraction, a senior citizen is defined in MCL 206.514(1) as an
“individual . . . who is 65 years of age or older at the close of the tax year. The term also includes the
un-remarried surviving spouse of a person who was 65 years of age or older at the time of death.”
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401(k) and 403(b) Plans
If all the contributions are made by the employee or if the employee makes contributions exceeding
the amount mandated by the plan to elicit employer contributions, then any distributions attributable
to those employee contributions will not qualify for the pension subtraction.
457 Plans
The Michigan Income Act prohibits a pension subtraction of distributions from a 457 plan.
Keogh or HR 10 Plans for the Self-Employed
Distributions are subject to the same general rules for other retirement plans, usually not made until a
participant separates from service, the plan is discontinued, or the participant reaches age 59½.
Other Distributions
The following distributions do not qualify for the pension subtraction:
1. Deferred compensation plans that allow the employee to set the amount of compensation to
be deferred and do not prescribe retirement age or years of service e.g., 401(k), 403(b), and
457 plans if all the contributions are made by the employee or if the employee makes
contributions that do not elicit contributions by the employer
2. Commercial Annuity Policies (unless the payments are made for life to a senior citizen)
3. Premature separation, withdrawal, or discontinuance of a plan prior to the earliest date the
recipient could have retired under the provisions of the plan
4. Payments received as an incentive to retire early unless the distributions are from a pension
trust
5. Eligible distributions received by a beneficiary of the decedent except for the surviving spouse
6. Distributions that are sourced to rollovers from plans or contributions that do not qualify (i.e.,
IRA distributions that are sourced to rollovers from a 457 plan).
Step 2: Dollar Limitations on Pension Subtractions
Once it has been determined that a pension distribution has met the requirements of a qualified
distribution set forth in Step 1, the next step is to determine if there are any dollar limitations on the
amount of the Michigan pension subtraction.
There are additional limitations on pension deductions based on the year of birth of the retiree who is
a single filer or on the year of birth of the oldest spouse for joint filers. The sections that follow first
discuss dollar limitations based on year of birth. After the date of birth limitations have been discussed,
the private pension limitations will be reviewed.
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PENSION LIMITATIONS
There are limitations set on retirement or pension benefits defined in MCL 206.30(9). These limitations
depend upon the birth year of the retiree, as well as filing status and marital status. Retirees are
divided into categories based on date of birth of the taxpayer or the date of birth of the oldest spouse
on a joint return.
Private pension limits for all filers are reduced by amounts claimed as a deduction for military
retirement from the U.S. Armed Forces, retirement from the Michigan National Guard, and Railroad
retirement.
Special rules apply for determining the limitation applicable to surviving spouses. A surviving spouse
may compute the subtraction based on the date of birth of an older deceased spouse as long as a
pension subtraction was claimed on a joint return for the tax year in which the spouse died and as long
as the surviving spouse has not since remarried. A surviving spouse born after 1945 who has reached
the age of 67 and has not remarried may elect to take the greater of the standard deduction against all
types of income or the pension deduction based on the date of birth of the older deceased spouse.
Surviving spouses should review Form 4884 instructions to determine which deduction is most
beneficial for their filing situation.
Taxpayers with Benefits from Qualified Fire, Police, or County Corrections Service: may subtract all
qualifying retirement or pension benefits received from federal or Michigan public sources and may
subtract qualifying private retirement and pension benefits up to the maximum private pension limit
established for the tax year. The maximum private pension limit is reduced by any deduction claimed
for public benefits.
Individuals are eligible for this deduction if they have a qualifying distribution included in AGI from
Michigan service as a:
• Public police or fire department employee subject to the Michigan Compulsory Arbitration of
Labor Disputes in Police and Fire Departments Act,
• A state police trooper or state police sergeant subject to the Michigan Compulsory Arbitration
of Labor Disputes of State Police Troopers and Sergeants Act, or
• A corrections officer employed by a county sheriff in a county jail, work camp, or other facility
maintained by a county that houses adult prisoners.
Note: Individuals with a qualifying distribution included in AGI from service in substantially similar
federal employment qualify for this deduction.
Individuals that were born after 1945 and have reached the age of 67, may receive a greater benefit by
claiming the standard deduction. Further discussion of the standard deduction follows.
Taxpayers born before 1946: may subtract all qualifying retirement or pension benefits received from
federal or Michigan public sources and may subtract qualifying private retirement and pension benefits
up to the maximum private pension limit established for the tax year. The maximum private pension
limit is reduced by any deduction claimed for public pension benefits.
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Taxpayers born in 1946 through 1952: qualify to claim a Tier 2 Michigan Standard Deduction upon
reaching the age of 67 or a retirement and pension benefits deduction.
For tax year 2023, the retirement and pension benefits deduction is up to 25% of the maximum private
pension limit. For single or married filing separate return the limit is up to $15,380 and for a married
filing joint return the limit is up to $30,759.
The Tier 2 Michigan Standard Deduction is applied against all income and is up to $20,000 for single,
married filing separate returns and $40,000 for married filing joint returns. The standard deduction is
reduced by the deduction for U.S. Armed Forces compensation and pension benefits, Railroad
Retirement Act benefits or pension benefits from Michigan National Guard services is claimed. A
taxpayer is considered to have reached age 67 on the day before their birthday.
If a taxpayer receives a pension from employment with a governmental agency that was not covered
by the federal Social Security Act (SSA), the maximum standard deduction is increased. The uncovered
taxpayer may claim a standard deduction up to $35,000 against all types of income on a single or
married filing separate return and up to $55,000 on a married filing joint return ($70,000 on a joint
return only if both spouses were “uncovered”). The deduction against all types of income is not
available to the extent the deduction for U.S. Armed Forces compensation and pension benefits,
Railroad Retirement Act benefits or pension benefits from Michigan National Guard Services is claimed.
Taxpayers who claim the standard deduction should not complete Form 4884.
Taxpayers who file a joint return and the older spouse was born prior to 1946 (Tier 1) are not eligible
for the standard deduction.
Taxpayers born after 1953 through 1956: qualify to claim a Tier 3 Michigan Standard Deduction upon
reaching the age of 67 or a retirement and pension benefits deduction.
For tax year 2023, the retirement and pension benefits deduction is up to 25% of the maximum private
pension limit. For single or married filing separate return the limit is up to $15,380 and for a married
filing joint return the limit is up to $30,759.
The Tier 3 Michigan Standard Deduction is applied against all income and is up to $20,000 for single,
married filing separate returns and $40,000 for married filing joint returns. The standard deduction is
reduced by amounts claimed for personal exemption, taxable Social Security subtraction, U.S. Armed
Forces compensation and pension benefits, Railroad Retirement Act benefits, or pension benefits from
Michigan National Guard Services. A taxpayer is considered to have reached age 67 on the day before
their birthday.
Beginning in 2018, taxpayers who receive retirement and pension benefits from employment with a
governmental agency that was not covered by the federal SSA and who had retired as of January 1,
2013 may claim a retirement or pension deduction up to $35,000 on a single or married filing separate
return and up to $55,000 on a married filing joint return ($70,000 on a joint return if both spouses
were uncovered). Upon reaching the age of 67, these individuals may claim a standard deduction equal
to $35,000 for single or married filing separate return and up to $55,000 on a married filing joint
return, or $70,000 for joint returns if both spouses are uncovered.
44
Taxpayers who claim the standard deduction should not complete Form 4884.
Taxpayers Born 1957 through 1958: qualify to claim a retirement and pension benefit deduction.
For tax year 2023, the retirement and pension benefits deduction is up to 25% of the maximum private
pension limit. For a single or married filing separate return the limit is up to $15,380 and for a married
filing joint return the limit is up to $30,759.
However, there may be a more beneficial deduction if a taxpayer has reached the age of 62, receives a
pension from employment with a governmental agency that was not covered by the federal SSA, and
receives taxable railroad retirement or military retirement benefits due to service in the U.S. Armed
Forces or Michigan National Guard. The uncovered taxpayer, who is at least 62, may deduct up to
$15,000 or up to $30,000 if both spouses were uncovered. Individuals should review Form 4884
instructions to determine which deduction is most beneficial for their filing situation.
Beginning in 2018, taxpayers who receive retirement and pension benefits from employment with a
governmental agency that was not covered by the federal SSA and who had retired as of January 1,
2013 may claim a retirement or pension deduction up to $35,000 on a single or married filing separate
return and up to $55,000 on a married filing joint return ($70,000 on a joint return if both spouses
were “uncovered”).
Taxpayers born after December 31, 1958, but before January 2, 1962: qualify to claim a retirement
and pension benefits deduction upon reaching the age of 62 if they receive a pension distribution from
employment with a governmental agency that was not covered by the federal Social Security Act.
Beginning in 2018, taxpayers who receive retirement and pension benefits from employment with a
governmental agency that was not covered by the federal SSA and who had retired as of January 1,
2013 may claim a retirement or pension deduction up to $35,000 on a single or married filing separate
return and up to $55,000 on a married filing joint return ($70,000 on a joint return if both spouses
were uncovered).
UNLIMITED PUBLIC PENSION SUBTRACTION
Applies only to retirees born before 1946, qualifying surviving spouses, and qualifying police, fire, and
corrections retirees with qualified distributions from Michigan public safety service.
MICHIGAN AND FEDERAL PUBLIC PENSIONS
Federal or Michigan public pensions are no longer totally exempt for all taxpayers. The amount that
may be deducted depends on the year of birth for a retiree who is single filer or on the year of birth of
the oldest spouse for joint filers.
Public pensions include benefits received from the federal civil service, State of Michigan, political
subdivisions of Michigan, military, and railroad pensions. If the requirements of the plans under Step
1 are met, these distributions may be deductible depending on the age of the filers.
45
PUBLIC PENSIONS FROM OTHER STATES
For retirees born before 1946, the Michigan subtraction for public pensions from other states is limited
to the private pension limits of $61,518for a single filer or $123,036 for joint filers. For all other
retirees, the pension limitations are based solely on date of birth and there is no difference between a
private and a public pension.
PRIVATE PENSIONS
Private pensions include employer plans and individual plans such as IRAs and senior citizen annuities.
The maximum subtraction allowed for a retiree born before 196 with a private pension is adjusted
annually by the percentage increase in the U.S. Consumer Price Index. The maximum deduction for the
2023 tax year is $61,518 on a single return and $123,036 for a joint return.
The following table outlines the annual maximum private pension deductions and only applies to
retirees born before 1946.
Tax
Single
Joint
Year
Return
Return
2019
$52,808
$105,615
2020
$53,759
$107,517
2021
$54,404
$108,808
2022
$56,961
$113,922
2023
$61,518
$123,036
RAILROAD PENSION BENEFITS
The taxable amount of railroad pension income included in AGI may be subtracted on the Michigan
return. Portions of a railroad pension are reported as Social Security on the federal return; however,
these benefits should be subtracted as railroad pension, not Social Security, on the Michigan return.
Additionally, all railroad retirement benefits must be reported on Schedule W even if there was no
Michigan withholding.
46
PENSION SUBTRACTION EXAMPLES
Example 1: Combined Public and Private Pension Distributions.
Sam is retired, single and born before 1946. He has a State of Michigan pension of
$40,000 and a private retirement benefit (e.g., 401(k)) of $33,000. His total pension
deduction for 2023 is determined as follows:
Maximum Private Pension Deduction $61,518
Less: Public Pension - 40,000
Allowable Private Pension Subtraction $21,518
Sam’s total pension subtraction is:
Public $40,000
Private +21,518
Total $61,518
Sam was able to deduct a portion of his private retirement benefits, if Sam’s public
pension was more than $61,518, he would not be able to subtract any of his private
pension.
Example 2: Employer and Employee Contributions to a 401(k) Plan.
Stuart’s employer established a 401(k) plan for its employees. The plan provides for a 50
percent employer match of employee contributions up to the maximum employer match
of 3 percent of the employee’s salary. The plan also allows the employees to make
additional unmatched contributions up to the annual percentage rate allowed by the IRC.
Stuart retired under the provisions of the retirement plan at age 60. At the time of his
retirement, Stuart received an annual statement from the 401(k)-plan showing total
contributions of $400,000, of which, $100,000 were employer contributions. Stuart took
a distribution of $25,000 in 2023.
Since the plan includes unmatched employee contributions, Stuart must determine what
amount of the $25,000 distribution is attributed to the unmatched contributions. The plan
called for a 50 percent employer match; therefore, $200,000 of the employee
contributions was required to elicit $100,000 employer matching contributions. The
remaining account balance of $100,000 is unmatched employee contributions. The
deductible amount of the 2023 distribution is determined as follows:
$100,000/$400,000 x $25,000 = $6,250 (distribution attributed to unmatched
contributions)
$25,000 - $6,250 = $18,750 (Maximum allowable pension subtraction. Actual subtraction
may be further limited based on the date of birth of the retiree.)
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INDIVIDUAL RETIREMENT ACCOUNTS (IRAs)
Retirement or pension benefits that may be subtracted on the Michigan return includes qualifying
distributions from IRAs. For additional information regarding IRAs, refer to RAB 2017-21 Individual
Income Tax – Individual Retirement Arrangements.
2023 PENSION AND RETIREMENT SUBTRACTION TABLE FOR RETIREES BORN
BEFORE 1946
The 2023 deductible retirement and pension benefits are limited to the lesser of the amount
included in AGI or the amounts shown below:
Source of Retirement Benefits
Single
Joint
U.S. Civil Service
Amount included in AGI
Amount included in AGI
State of Michigan
Amount included in AGI
Amount included in AGI
Michigan political subdivisions
Amount included in AGI
Amount included in AGI
Private
$61,518
$123,036
Public pensions from other states
$61,518
$123,036
Qualified senior citizen retirement
$61,518
$123,036
annuities
Limited to public pension or
Limited to public pension or
$123,036, whichever is
$61,518, whichever is greater
Public and private
greater (cannot exceed actual
(cannot exceed actual qualified
qualified distributions
distributions received).
received).
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FORM 1099-R DISTRIBUTION CODES
Recipients of a pension distribution receive Form 1099-R. There is a box on Form 1099-R titled
“Distribution code(s).” Look in the “Distribution code(s)” box for the number that describes the
condition under which the pension or retirement benefit was paid.
1099-R
Dist. Code
Description
Is the condition eligible for Michigan tax
exemption? (Dollar and date of birth limits
may still apply.)
1
Early distribution, no known
exception
No
2
Early distribution, exception
applies
No, unless:
• Part of a series of substantially equal periodic
payments made for the life of the employee or
the joint lives of the employee and employee’s
beneficiary.
• Early retirement under the terms of the plan.
3
Disability
Yes
4
Death
•Yes, for surviving spouse only and only if the
decedent would have also qualified for a
normal distribution under Distribution Code 7
at the time of death. This may be subject to
limitations based on the year of birth of the
decedent.
• No, for all other beneficiaries.
• No, if paid as a death benefit payment made
by an employer, but not made as part of a
pension, profit-sharing, or retirement plan.
5
Prohibited transaction
No
6
Section 1035 exchange: tax-free
exchange of life insurance,
endowment insurance, and
annuity contracts
No
7
Normal distribution from a plan;
distribution from a traditional IRA
if the participant is at least 59½;
Roth conversion if the participant
is at least age 59½; or distribution
from a life insurance, annuity, or
endowment contract
Yes
8
Taxable excess contribution plus
earnings/excess deferrals
(and/or earnings)
No
9
Cost of current life insurance
protection
No
49
DEFERRED COMPENSATION
Distributions received from deferred compensation plans, which allow the employee to set the amount
of compensation to be deferred and do not prescribe retirement age or years of service, are treated as
ordinary income. Deferred compensation distributions are usually not considered pension income and
may not be subtracted on the Michigan return even when a distribution code 7 is indicated on the
1099-R.
Federal law, 4 USC 114, prohibits a state from taxing certain deferred compensation distributions
received by a nonresident. Therefore, nonresidents are not subject to Michigan income tax on
distributions from deferred compensation plans as defined in IRC Sections 401(k), 457, and
3121(v)(2)(c).
INTEREST, DIVIDENDS, AND CAPITAL GAINS DEDUCTION
FOR SENIOR CITIZENS BORN BEFORE 1946
Senior citizens born before 1946 may take a deduction for interest, dividends, and capital gains up to
$13,712 for a single return and $27,424 for a joint return for the 2023 tax year. The deduction is
adjusted by the percent increase in the U.S. Consumer Price Index each year. This maximum deduction
must be reduced by the amount of deduction taken for pension and retirement income.
The term “senior citizen” as used in this section, refers to a person 65 years of age or older or an un-
remarried surviving spouse of an individual who was 65 years of age or older at the time of death.
Beginning in 2012, this deduction is available only to taxpayers born before 1946 or the surviving
spouse.
Example: Step 1: James and Joanne are married and file a joint income tax return. James was
born before 1946. A partial listing of their income is as follows:
Pension Income
$6,000
Capital Gains
17,000
Dividend Income
1,800
Interest Income
3,800
Step 2:
Calculation of interest, dividend, and capital gains deduction:
Maximum Deduction
$27,424
Less: Pension Subtraction
6,000
Maximum Allowable Deduction
$21,424
Step 3: Total interest, dividends, and capital gains = $22,600
Step 4: Use the lesser of the total interest, dividends, and capital gains ($22,600) or
the maximum allowable deduction ($21,424).
Step 5: The interest, dividends, and capital gains deduction for James and Joanne is
$21,424.
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TAX INFORMATION
TAX RATE
The tax rate for 2023 is 4.05%.
For prior years use the following rates:
• 2022 – 4.25%
• 2021 - 4.25%
• 2020 - 4.25%
• 2019 - 4.25%
VOLUNTARY CONTRIBUTIONS
The taxpayer can make contributions to certain funds listed on Form 4642, Voluntary Contribution
Schedule. These contributions are treated as additional taxes. Any contributions will increase tax due
or reduce any refund.
USE TAX
The taxpayer must use Worksheet 1 in the MI-1040 instruction booklet to calculate the use tax and
enter the amount of use tax due on the applicable line of Form MI-1040.
TAX CREDITS (NONREFUNDABLE)
WHAT IS A NONREFUNDABLE TAX CREDIT
A tax credit is a direct reduction of the tax and is based on a certain formula. Any excess of the credits
listed below over tax due is not refundable.
CREDIT FOR INCOME TAX IMPOSED BY QUALIFIED GOVERNMENT UNITS OUTSIDE OF
MICHIGAN
A Michigan resident may be allowed a credit for income tax paid to another state of the U.S., a political
subdivision (city, county, etc.) of another state, the District of Columbia, or a Canadian province. Only
tax imposed on income that is also subject to Michigan tax may be claimed for the credit. A copy of
the other state, city, or county income tax return must be included.
NOTE: Generally, a credit is not allowed for tax imposed by another state on business income
apportioned to that state.
51
For a Michigan resident, the allowable credit for tax imposed by:
1. Another state cannot exceed the lesser of:
• The amount of tax imposed by another state on salaries, wages, and other income earned in
that state that is also taxable to Michigan,
OR
• The percentage of Michigan tax due on salaries, wages, and other income earned in the
other state.
Calculation of Michigan resident’s credit for tax imposed by another state:
Step 1: Non-Michigan taxable income that is taxed by both states divided by Michigan
income subject to tax (line 14 on MI-1040)
THEN
Step 2: Take Michigan Tax amount on the MI-1040, line 17, and multiply by the
percent computed from step 1.
To claim this credit, a return must be filed with the other state and a copy of the other state’s
return included with Form MI-1040. A calculator is available on www.michigan.gov/taxes to
assist in the calculation of the credit for income tax imposed by a qualified governmental unit
outside of Michigan.
Exceptions: The credit is not allowed on salaries and wages earned in Illinois, Indiana, Kentucky,
Minnesota, Ohio, and Wisconsin since this income is not taxable by these states (based on a
reciprocity agreement). However, the credit is allowed if a city or county tax is paid in a reciprocal
state.
The credit is not allowed on salaries and wages which are subtracted as “Income Attributable to
Another State” by a part-year resident since this income is not taxed by Michigan. Nonresidents
are not eligible for the credit.
2. A Canadian province credit cannot exceed the lesser of:
• The Michigan tax due on Canadian income taxed by Michigan,
OR
• The portion of provincial tax not claimed as a credit for U.S. income tax purposes.
A Canadian credit is allowed only if provincial tax was paid. To claim this credit, file Michigan
Resident Credit for Tax Imposed by a Canadian Province (Form 777). Instructions are included.
Attach copies of Canadian federal Individual Income Tax Return, Canadian Form T-4, U.S. Form
1116, Computation of Foreign Tax Credit, and U.S. Form 1040. Credit is not allowed on the
52
Michigan return for that portion of provincial tax that is a carryover from a previous year or that
is being carried over to a future year on the federal return.
MICHIGAN HISTORIC PRESERVATION CREDIT
2020 PA 343, as effective December 30, 2020, restores the State Historic Preservation Tax Credit
Program in Michigan. As part of this program, qualified taxpayers may claim a nonrefundable credit
equal to 25 percent of qualified expenditures incurred in a rehabilitation project that is approved,
completed, and thereafter certified as completed by the State Historic Preservation Office (SHPO) after
December 31, 2020, and before January 1, 2031. The procedures for the submission and approval of
proposed rehabilitation plans, as well as the subsequent certification of completed rehabilitation
projects, is based on rules promulgated by SHPO. For additional information on the implementation
and current status of this program, please visit www.miplace.org/historic-preservation/programs-
and-services/historic-preservation-tax-credits/.
The certification of rehabilitation plans that are eligible for the Historic Preservation Income Tax Credit
had previously ended as of January 1, 2012. However, for plans that were approved prior to that date,
the nonrefundable credit for that project may still be claimed. Any unused portion of that
nonrefundable credit may be carried forward for a maximum of ten years. Taxpayers that have a
carryforward of an unused portion of the credit should file Historic Preservation Tax Credit (Form 3581)
when claiming the credit.
TAX CREDITS (REFUNDABLE)
HOMESTEAD PROPERTY TAX CREDIT
This credit is covered in Chapter 3 of this Manual.
FARMLAND PRESERVATION TAX CREDIT
This credit is provided for under Farmland and Open Space Preservation Act which is part of the
Natural Resources and Environmental Protection Act PA 451 of 1994. The Act replaced the repealed
farmland preservation act known as “PA 116.” The Act enables a landowner to enter into a
development rights agreement (for farmland) with the State. The agreements are designed to ensure
the land remains in agricultural use for an agreed-upon period. In return for maintaining the land in
agricultural use, the landowner is entitled to certain income or property tax benefits.
To receive this credit, complete the Michigan Farmland Preservation Tax Credit Claim (Form MI-
1040CR-5) and include it with the MI-1040.
The Farmland Preservation Tax Credit refunds to farmland owners the taxes in excess of 3.5 percent of
their total household income on property covered by a Farmland Development Rights Agreement
(FDRA) with the Michigan Department of Agriculture and Rural Development.
Schedule of Taxes and Allocation to Each Agreement (Schedule CR-5) must be completed. Use more
than one Schedule CR-5 as needed. The system will not accept a substitute Schedule CR-5 in lieu of the
Michigan Schedule CR-5.
53
EARNED INCOME TAX CREDIT
A taxpayer may claim a refundable credit against the income tax for an amount equal to 30 percent of
the credit the taxpayer is allowed to claim under IRC 32 (i.e., the Earned Income Tax Credit (EITC)) for a
tax year on a return filed under the act for the same year.
INCOME TAX WITHHELD
This appears on the taxpayer’s W-2 statement under “Michigan Tax Withheld.” Be sure to include
withholding for each W-2. Complete Schedule W and include it with the return. Note that withholding
can be shown on other forms such as W-2Gs and 1099s. Do not include W-2 statements with the
return.
CLAIM OF RIGHT DOCTRINE
The Michigan Income Tax act allows taxpayers to claim a credit against the Michigan income tax equal
to the amount of tax paid on amounts included in taxable income in a prior tax year and repaid in the
current tax year.
The amount of the repayment must have been deducted on U.S. Schedule A or claimed as a credit on
U.S. Form 1040 to claim a credit on the Michigan return. If the repayment was deducted in arriving at
AGI, no additional credit is allowed on the Michigan return.
Example: Included in Roy’s 2012 AGI was $18,000 in Supplemental Unemployment Benefits (SUB
pay) from ABC, Inc. In 2023, Roy repaid the $18,000, as it was determined he did not have
the right to receive the SUB pay. The 2023 repayment qualified under IRC 1341 and was
taken as an itemized deduction by Roy on his 2023 federal Schedule A. For the 2023 tax
year, Roy is allowed a $779 ($18,000 x .0433) credit against his Michigan income tax.
Calculate the credit using the tax rate in effect for the year the amount was included in
Michigan taxable income (4.33 percent), not the rate (4.05 percent) in effect for 2023, the
year of the repayment. Report the credit on the line for reporting withholding taxes. Write
“Claim of Right/Repayment” next to the withholding line. Include a copy of Roy’s federal
Form 1040 pages 1 and 2, Schedule A, Schedule 5 and documentation of the repayment,
and a calculation showing how the credit was determined on his 2023 MI-1040.
ESTIMATED PAYMENTS/CREDIT FORWARD
Any estimated payments that were made for the tax year and/or a credit forward from the previous
tax year should be claimed on the MI-1040. Any taxpayer who expects their tax liability for the year to
exceed $500, after withholding and tax credits, should file Michigan Estimated Income Tax for
Individuals (Form MI-1040ES) and make quarterly estimated payments for the year.
54
CHAPTER 3 – HOMESTEAD PROPERTY TAX CREDIT (FORM MI-
1040CR AND FORM MI-1040CR-2)
GENERAL INFORMATION
INTRODUCTION
A homestead property tax credit is granted by the State of Michigan to assist residents in paying their
property taxes. Property taxes are taxes paid by a homeowner directly to a Michigan city, township, or
county, or that portion of rent paid to a landlord that represents property tax on an apartment, duplex,
home, or other rental unit, or a service fee in lieu of taxes paid.
NOTE: The taxes do not have to be paid to the taxing authority in order to claim the homestead
property tax credit. The credit is based on taxes levied for the tax year.
CREDIT REFUND
The taxpayer will be refunded the total computed credit unless they have a liability for:
• Income tax, business tax, etc.
• Other State agencies
• Friend of the Court
• Third-party liabilities.
If the taxpayer has a liability, the credit will be used to offset the amount due. However, should the
credit be greater than the liability, the balance of the credit will be refunded.
INSTRUCTIONS
This chapter will often refer to the “instructions.” These are the instruction booklets used to prepare
the homestead property tax credit forms MI-1040CR and MI-1040CR-2. Read the instruction booklets.
The following information will recap and/or further explain the instructions.
WHO MAY CLAIM A CREDIT
A credit may be claimed by a person who:
1. Was a Michigan resident for at least six months of the year, and
2. Has THR that does not exceed $67,300, and
3. Owned or rented and occupied a Michigan homestead on which either property tax or a service
fee was levied, and
4. Has property taxes or 23 percent of annual rent that exceeds 3.2 percent of total household
resources (THR)
Additionally, a homeowner must have a taxable value on their homestead that does not exceed
$154,400 (with an exception for vacant farmland classified as agricultural).
55
HOMESTEADS THAT DO NOT QUALIFY
A homestead property tax credit may not be claimed for:
• Rent paid to a city housing project if no property taxes or service fees are paid by the property
owner.
• Rent or property taxes on a summer cottage or other secondary home.
• Rent or property taxes on property not located in Michigan.
• Rent paid by anyone who is not a domiciled resident of Michigan.
• Property taxes on a homestead with a taxable value greater than $154,400 (with an exception
for vacant farmland classified as agricultural).
• Homesteads with an exemption from paying property taxes for the tax year.
CALCULATION OF THE CREDIT
Homeowner
The credit is equal to a percentage (60% - 100%) of the amount that property taxes exceed 3.2 percent
of THR. The credit is limited to $1,700.
Renter
The credit is equal to a percentage (60% - 100%) of the amount that 23 percent of the annual rent
exceeds 3.2 percent of THR. The credit is limited to $1,700 (see exception under Renter on in this
chapter, for property subject to a service fee in lieu of property taxes).
Calculation
The calculation of the credit begins with the amount that property taxes (or 23 percent of the annual
rent) that exceeds 3.2 percent of THR. A credit-phase out applies for all claimants once THR exceeds
$58,300 (see the Phase-Out Chart on in this chapter). No credit is allowed for any claimant with THR
exceeding $67,300.
• For most filers, the credit is equal to 60 percent of the amount that property taxes (or 23
percent of annual rent) exceed 3.2 percent of THR, limited to $1,700, if THR is $58,300 or less.
The credit-phase out applies once THR exceeds $58,300(see the Phase-Out Chart in this
chapter). The credit is completely phased out once THR exceeds $67,300.
• A claimant who, at the end of the tax year, is deaf, blind, hemiplegic, paraplegic, quadriplegic,
or “totally and permanently disabled”, will receive 100 percent of their computed credit,
limited to $1,700, if THR is $58,300or less. For 2023, “Totally and permanently disabled” status
stopped when the claimant reached the age of 66 or older by June 30, 2023. The credit phase-
out applies once THR exceeds $58,300 (see the Phase-Out Chart in this chapter). The credit is
completely phased out once THR exceeds $67,300.
56
• For a senior citizen claimant age 65 or older at the end of the tax year (if married filing jointly at
least one claimant, filer or spouse, is 65 years of age or older), the amount that can be claimed
depends on the senior claimant’s THR:
− For senior claimants whose THR is $21,000 or less, 100 percent of the credit can be
claimed, limited to $1,700.
− For senior claimants whose THR is $21,001 to $30,000, the credit is reduced by 4%
for each $1,000 of total household resources in excess of $21,000 and up to
$30,000. The $1,700 maximum then applies (see the Senior Credit Reduction Chart
below).
− For senior claimants whose THR is $30,001 to $58,300, 60 percent of the credit can
be claimed, limited to $1,700.
− For senior claimants whose THR exceeds $58,300, the credit phase-out applies after
the $1,700 limitation (See Phase-Out Chart in this chapter).
SENIOR CREDIT REDUCTION CHART
Total Household Resources
Percentage
$ 0 - 21,000
100% (1.0)
21,001 - 22,000
96 (0.96)
22,001 - 23,000
92 (0.92)
23,001 - 24,000
88 (0.88)
24,001 - 25,000
84 (0.84)
25,001 - 26,000
80 (0.80)
26,001 - 27,000
76 (0.76)
27,001 - 28,000
72 (0.72)
28,001 - 29,000
68 (0.68)
29,001 - 30,000
64 (0.64)
30,001 - 58,300
60 (0.60)
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PERCENT OF PROPERTY TAXES NOT REFUNDABLE - TOTAL HOUSEHOLD
RESOURCES OF $6,000 OR LESS
For most filers, 3.2 percent of THR is subtracted from the annual property tax or 23 percent of annual
rent to compute the credit. However, if the claimant or spouse is 65 or older or is paraplegic,
quadriplegic, hemiplegic, deaf, or is totally and permanently disabled or an un-remarried spouse of an
individual 65 or older, and THR is $6,000 or less, use the percentage found in the table below.
THR
% of THR
$3,000 or less
0%
$3,001 - $4,000
1%
$4,001 - $5,000
2%
$5,001 - $6,000
3%
Greater than $6,000
3.2%
MAXIMUM CREDIT
The maximum credit is $1,700, even if the calculated amount is greater than $1,700. The limit is
imposed before the phase-out.
PHASE-OUT
For claimants whose THR exceeds $58,300, the computed credit (maximum $1,700) must be reduced
by 10 percent for each thousand or portion of thousand over $58,300 and up to $67,300. Claimants
whose THR exceeds $67,300 are no longer eligible for the credit.
CREDIT PHASE-OUT CHART
Total Household Resources
Percent
58,301 - $59,300
90% (0.9)
59,301 - 60,300
80 (0.8)
60,301 - 61,300
70 (0.7)
61,301 - 62,300
60 (0.6)
62,301 - 63,300
50 (0.5)
63,301 - 64,300
40 (0.4)
64,301 - 65,300
30 (0.3)
65,301 - 66,300
20 (0.2)
66,301 - 67,300
10 (0.1)
67,301 - above
No Credit
58
Example 1: A senior citizen has total household resources of $60,350 and property taxes
of $2,500. The property taxes exceed 3.2 percent of total household resources
by $569. The senior citizen’s total household resources exceed $30,000;
therefore, the credit is reduced from 100 percent to 60 percent, or $. The
phase-out then applies and will further reduce the $341 credit to 70 percent,
for a credit of $239 ($341 x .70).
Example 2: A claimant has total household resources of $66,300and property taxes of
$5,000. The property taxes exceed 3.2 percent of total household resources
by $2,878. The credit is first reduced to 60 percent or $1,727. The credit is
then limited to $1,700, the maximum allowed. After the $1,700 limit is
applied, the phase-out to 20 percent further reduces the credit to $340
($1,700 x .20).
WHEN TO FILE A CLAIM
Claims must be filed within four years from the due date of Form MI-1040.
WHICH FORM TO USE (MI-1040CR OR MI-1040CR-2)
Use Form MI-1040CR, Homestead Property Tax Credit Claim, for:
• General claimant
• Paraplegic, quadriplegic, hemiplegic, deaf, blind, or totally and permanently disabled persons
• Senior citizen – regular method
• Senior citizen - alternate rent credit (rent larger than 40 percent of THR)
Use Form MI-1040CR-2, Homestead Property Tax Credit Claim for Veterans and Blind People, for:
• Veteran with a service-connected disability or veteran’s surviving spouse, a surviving spouse of
a veteran deceased in service, or a veteran of wars before World War I
• Person in active military whose total household resources is $7,500 or less
• Pensioned veteran or his/her surviving spouse whose total household resources is $7,500 or
less
• Surviving spouse of a nondisabled or non-pensioned veteran of the Korean War, World War II,
or World War I whose total household resources is $7,500 or less
• Blind person who owns their home.
Claimants eligible for the credit for veterans and blind people should prepare both the MI-1040CR and
the MI-1040CR-2. File the credit claim that results in a larger credit.
59
Beginning in 2013, disabled veterans who own their home, filed a State Tax Commission Affidavit for
Disabled Veterans Exemption, and received a property tax exemption, are not eligible for a homestead
property tax credit on that exempt property.
IDENTIFICATION
SOCIAL SECURITY NUMBER(S)
Both SSNs must be included on the form for married filing jointly and filing separately. This claim must
be filed jointly unless there is a legal separation and separate homesteads are maintained.
SCHOOL DISTRICT CODE
Obtain the code number from the MI-1040 instruction booklet.
For residents, enter the code for the school district that the taxpayer lived in on December 31, 2023.
For part-year residents who did not live in Michigan as of December 31, 2023, enter “10000” in the
school district code box.
AGE 65 OR OLDER
One spouse, if filing jointly must be 65 or older on December 31, 2023, to qualify as a senior. The
unremarried spouse, regardless of age, of a person who was 65 or older at the time of death, also
qualifies as a senior.
DISABILITY DEFINITIONS
Use the following definitions to determine if the taxpayer is eligible to check box 5b of Form MI-
1040CR:
Blind An individual who has a permanent impairment of both eyes of the following
status: central visual acuity of 20/200 or less in the better eye with corrective
glasses, or central visual acuity of more than 20/200 if there is a field defect in
which the peripheral field has contracted to such an extent that the widest
diameter of visual field subtends an angular distance of not greater than 20
degrees in the better eye.
Deaf An individual whose hearing is totally impaired or whose hearing, with or
without amplification, is so seriously impaired that the primary means of
receiving spoken language is through other sensory input, including but not
limited to lip reading, sign language, finger spelling, or reading.
Hemiplegic An individual who has paralysis of one side of the body.
Paraplegic An individual who has paralysis of the lower half of the body.
Quadriplegic An individual who has paralysis of both arms and both legs.
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Totally and permanently disabled
An individual who is unable to engage in any substantial gainful activity
permanently by reason of any medically determinable physical or mental
impairment disabled which can be expected to result in death, or which has
lasted or can be expected to last for a continuous period of not less than 12
months. For an additional reference see 42 U.S.C. 416.
Support for the totally and permanently disabled exemption is the receipt of any
of the following types of income:
− Social Security Disability benefits (SSDI)
− Supplemental Security Income (SSI) disability benefits
− Veterans’ Administration (VA) disability retirement payments
A taxpayer who did not receive any of the above income in the tax year may be
required to furnish a physician’s statement to certify total and permanent
disability.
NOTE: The credit calculation for totally and permanently disabled claimants does not
apply for a claimant who is 66 years of age or older by June 30, 2023. 42 U.S.C. §
416
FILING STATUS
Check the applicable box for the claimant’s filing status. If the claimant filed a joint federal return,
they must file a joint property tax credit. Married couples who file married filing separate must include
the total household resources of both spouses unless they filed separate federal returns and
maintained separate homesteads. If a claimant filed their federal return as head of household or
qualifying widow(er), the claimant must file the property tax credit as single or, if married, married
filing separately.
NOTE: If married taxpayers filed a Michigan income tax return (Form MI-1040), it may be possible
for the filing status on the property tax credit claim to be different than the filing status
checked on the income tax return, Form MI-1040.
RESIDENCY STATUS
Check all applicable boxes. If one spouse was a resident and the other spouse was a nonresident or
part-year resident, check the appropriate box for each spouse. If either spouse was a part-year
resident, enter the dates of Michigan residency.
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COMPUTATION
This section identifies the allowable taxes, rent, and THR, which are the key figures needed to calculate
the credit.
Line references below in sections titled “PROPERTY OWNER” through “SENIOR CITIZEN - ALTERNATIVE
METHOD FOR RENTER” refer to lines on the 2023, Homestead Property Tax Credit Claim Form MI-
1040CR.
Instructions on completing the 2023, Homestead Property Tax Credit Claim for Veterans and Blind
People Form MI-1040CR-2, will be discussed later in this chapter.
PROPERTY OWNER
Property Taxes
The taxable value (TV) and property taxes must be entered on the return. The TV can be found on the
property tax statement, or it can be obtained from the local tax assessor.
Homestead Property Owner
Determine that the property is occupied by the owner.
• Claim only the taxes billed (levied) for the year of claim regardless of when tax was paid. These
include additional taxes assessed or refunded in the current year that are attributable to a prior
year because of a Michigan Tax Tribunal decision or the reversal of a homestead affidavit
denial.
• Administrative fees of up to 1 percent of the taxes may be included in the amount of taxes used
to compute the credit.
• Special assessments may not be included in taxes unless special assessments are based on the
TV or state equalized value, are levied using a uniform millage rate, and are applied to the
entire taxing jurisdiction. Public Act 28 of 2003 allows an assessment that is levied township-
wide but not on a village within the township to be included in the credit calculation if the
assessment meets the first two criteria and is for police, fire, or advanced life support.
• Delinquent taxes paid in 2023 may not be included in the amount of taxes used to compute the
credit for 2023.
• If the homestead was bought or sold during 2023, the taxes must be prorated for the time each
homestead was owned and occupied.
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Farmland Property Owner
Farmers may include farmland taxes in the property tax credit claim if any of the following conditions
apply:
•
If agricultural gross receipts are greater than THR, all farmland property taxes including taxes on
unoccupied farmland are eligible for the credit. Taxes on farmland that is rented by or leased to
another person and is not adjacent or contiguous to taxpayer’s home is not eligible for the
credit.
•
If agricultural gross receipts are less than THR and taxpayer has lived in the home more than ten
years, the taxes on the home and the adjacent and contiguous farmland are eligible for the
property tax credit.
•
If agricultural gross receipts are less than THR and taxpayer has lived in the home less than ten
years, the taxes on the home and five contiguous and adjacent acres of farmland are eligible for
the credit.
•
If the taxable value of the homestead excluding the taxable value of the unoccupied farmland
classified as agricultural exceeds $154,400, the taxpayer is not eligible for the homestead
property tax credit.
Homeowner, Full-Year
Indicate taxable value (TV) and all allowable property taxes on the appropriate lines.
Homeowner, Part-Year
Property taxes must be prorated if the claimant was a part-year resident or a full-year resident who
bought or sold a home during the year. The total time claimed for all homesteads must not exceed 12
months or 365 days, and the taxes must be prorated for the time the claimant owned and occupied
each homestead. Part-year residents are limited to the number of days they actually lived in Michigan.
They must live in Michigan for at least six months to qualify for the credit. Complete “Part 3:
Homeowners Who Moved in 2023” of the MI-1040CR, using both columns if necessary.
NOTE: If either of the homesteads owned has a taxable value that exceeds $154,400, the property
taxes on that homestead may not be included in the credit claim.
Example: Raymond Smith sold his homestead (House A) on March 31. He occupied it until March
31. On April 1, he moved into a new homestead (House B) which he purchased. Property
taxes billed for that year are as follows:
Taxing
Date
Authority
Billed
House A
House B
City
July
$600
$1,050
County
November
+130
+235
Total
$730
$1,285
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Mr. Smith occupied House A for 90 days and House B for 275 days in the tax year. He
would use the following percentage of property taxes on each house for the credit:
House A
House B
90 Days
= 25%
275 Days
= 75%
365 Days
365 Days
Therefore, assuming both houses have a TV of $154,400 or less, Mr. Smith is entitled to
claim $1,147 of property taxes as computed below:
Total Tax
Percent
Allowable Tax
House A
$ 730
X
25%
=
$ 183
House B
1,285
X
75%
=
964
Total
$1,147
RENTER
Rent
If a landlord does not pay property tax or a service fee, no portion of the rent is considered to be
property tax. Therefore, no credit is allowed.
Rent should not include security deposits, late fees, or charges for other services provided. Examples
of other services may include laundry, meals, or housekeeping.
The property tax considered included in rent is as follows:
• 23 percent of rent paid, if the landlord pays property tax.
• 10 percent of rent paid, if the landlord pays a service fee to the local unit of government
instead of property tax (PILOT [Payment in lieu of taxes] program).
Renter, Full-Year
Claimant rented a homestead for the full year (12 months). Complete “Part 4: Renters” of the MI-
1040CR and follow instructions to complete the remainder of the form.
Renter, Part-Year
Claimant either moved from a rental situation to owning a home (or vice versa), was a part-year
resident, or is filing on behalf of a deceased taxpayer. Claimant may only claim rent for the period of
time they were a resident and actually occupied the rental unit. Do not include rent beyond the dates
claimant lived in the unit (e.g., paid additional rent to fulfill a lease when they moved to another
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homestead). Complete “Part 4: Renters” of the MI-1040CR and follow instructions to complete the
remainder of the form. If the claimant also bought or sold a home that was their homestead in the tax
year, also complete “Part 3: Homeowners Who Moved in 2023” of the MI-1040CR.
TYPES OF HOUSING
To determine whether the claimant should be reporting a property tax figure or rent, consider the
various types of housing and/or circumstances that may affect how the claimant should file.
Mobile Home
A claimant living in a mobile home park may claim $3 per month for property taxes in addition to 23
percent of the balance of the rent paid. The $3 per month tax is a specific tax imposed on each lot in
the mobile home park, in addition to the general property tax paid by the landlord. If the renter also
pays a separate property tax for an additional attached building (such as a garage, carport, or shed),
they may also claim the specific property tax for the attached building. The taxes must be billed
separately to qualify. Complete “Part 4: Renter” of the MI-1040CR. Include the lot rent minus the $3
per month tax and follow instructions to complete the remainder of the form. The $3 a month for the
specific tax is reported as property taxes levied (e.g., enter $36 if claimant lived all 12 months of the tax
year in the mobile home park).
Example: John Jackson lives in the Sunny Day Trailer Park. Mr. Jackson’s lease agreement for the lot
indicated total rent paid for the entire tax year was $1,656. Included in each month’s rent
is a $3 specific tax, which totals $36 a year. The following entries are made on the credit
claim:
• Page 3, line 52
− Column A, enter the address where John Jackson lived and rented
− Column B, enter the landowner’s name and address
− Column C, enter 12 as the number of months rented in the tax year
− Column D, enter $135 as the rent paid per month ($1,656 - $36=$1,620)
($1,620 ÷ 12 = $135
− Column E, enter $1,620 as the total rent paid
• Page 1, line 10: Enter $36 as taxes levied
• Page 1, line 11: Enter $1,620 as total rent paid
• Page 1, line 12: Enter 23% of the rent paid, $373 (line 11, $1,620 x 23%)
• Page 1, line 13: Enter $409 as the total taxes claimed for the property tax credit
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Service Fee Housing
If the claimant lives in housing on which service fees are paid instead of property taxes, the credit must
be computed using 10 percent of the rent, rather than the 23 percent generally used by other
claimants who rent.
Complete “Part 5: Alternate Housing Facilities” of the MI-1040CR and follow instructions to complete
the remainder of the form.
Subsidized Housing
A claimant who lives in subsidized housing must compute their homestead property tax credit based
on rent if the facility provides an itemized bill identifying the portion charged for rent, separate from
charges for other services such as food, housekeeping, or transportation. Only the amount of rent paid
by the claimant can be used to compute the property tax credit.
If the claimant’s rent was subsidized; complete “Part 5: Alternate Housing Facilities” of the MI-
1040CR and follow instructions to complete the remainder of the form. Do not include amounts paid
on behalf of the claimant by a government agency.
If the facility pays service fees in lieu of property taxes, compute the credit using 10 percent of the rent
paid by the claimant, rather than 23 percent. The claimant may be required to submit a copy of the
separate billing or other documentation from the facility verifying the amount of rent paid.
If the facility bills a lump sum for rent and services, the resident may not claim rent, but may claim
their allocable share of the property taxes assessed on the entire facility.
Nursing Home, Home for the Aged, and Adult Foster Care Home
A permanent resident of a nursing home, home for the aged, or adult foster care home is entitled to a
homestead property tax credit based on rent if the facility provides an itemized bill identifying the
portion charged for rent and for other services such as food, housekeeping, or personal care. The
resident may be required to submit the itemized bill or other documentation from the landlord that
shows the amount of rent paid. Only rent paid by the resident can be used to compute the property
tax credit.
If the facility bills a lump sum for rent and other services and does not provide an itemized statement
identifying the amount of rent, the resident may not claim rent, but may claim their allocable share of
the property taxes assessed on the entire facility. The resident’s allocable share is calculated by
dividing the facility’s property tax by the number of licensed beds.
If the facility receives a direct payment from a State or federal agency for the care of the resident, then
the allocable share may be limited. The resident cannot claim an allocable share that is greater than
the charges paid by the resident to the facility.
Example: Mrs. Brown’s nursing home charges for the entire tax year were billed in a lump sum of
$12,500 (for rent, food, and other nursing services) to the State of Michigan. Of that
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sum, $12,000 was paid directly to the nursing home by the State. Mrs. Brown paid the
balance due of $500.
Mrs. Brown’s “allocable share” of property taxes on the nursing home, based on 100
beds and $60,000 in real property taxes, is $600. Since Mrs. Brown’s total charges paid
by her are less than her “allocable share,” she may use the lesser amount of $500 for
calculating a property tax credit.
On page 3 of the return, check box 57c and enter $500 on line 57 as Mrs. Brown’s
prorated share of taxes. Carry the figure on line 57, $500, to line 10 on page 1 of the
form. Leave line 9 blank and do not complete lines 11 and 12.
Room and Board
If the claimant pays room and board in separate billings, the claimant must base the credit on the rent.
The claimant may be required to submit a copy of the separate billing or other documentation from
the landlord showing the amount of rent paid. If the claimant pays room and board in one billing and
is unable to identify the portion of the bill that constitutes rent, the credit must be based on a prorated
share of the property taxes on the facility. If the landlord does not provide this figure, divide the
square footage of the claimant’s living space by the total square footage of the facility, and multiply
the total taxes on the facility by that percentage.
Special Housing
A claimant who resides in housing where the lease includes meals and other services (housekeeping,
laundry, transportation, etc.), must base their credit on only the portion of the bill that constitutes
rent. A senior citizen claimant who can identify the amount of rent separately from other charges may
claim their credit using the alternate senior method. A claimant may be required to produce a copy of
the facility’s documentation that identifies the portion of the bill constituting rent to substantiate the
claim.
If the claimant is unable to identify the portion of the bill that constitutes rent, the credit must be
based on a prorated share of the property taxes on the facility. The facility should provide the claimant
with the prorated share of the property taxes for use in the credit calculation.
Cooperative Housing
Use the claimant’s share of property taxes on the building. Ask to see a statement from the co-op
giving the amount of taxes or percentage of the monthly payment that is considered tax on the
claimant’s unit. Enter the taxable value on line 9. Check box 57a on page 3 of the return and enter the
claimant’s prorated share of taxes on line 57. Carry the figure on line 57 to line 10 on page 1 of the
return.
If the claimant lives in a co-op where residents also pay rent on the land under the building, they may
also claim 23 percent of that land rent. Complete lines 52 and 53 for the land rent on page 3 of the
return. Carry the figure from line 53 to line 11 on page 1 of the form. Calculate 23 percent of line 11
and enter on line 12.
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TOTAL HOUSEHOLD RESOURCES (THR)
THR is the total income of a single person or a married couple who maintain a household. THR includes
taxable and nontaxable income. THR is federal AGI plus income that is specifically excluded or exempt
from the computation of AGI, and increased by the following deductions from federal gross income:
• Any net business loss after netting all business income and loss
• Any net rental or royalty loss
• Any carryback or carryforward of a net operating loss (NOL) as defined in Section 172(b)(2) of
the internal revenue code.
(See Income and Deductible Items, Summary Chart later in this publication)
The following is a partial list of income and excluded or exempt income that must be included in a
claimant’s THR:
• Wages, salaries, tips, sick or long-term disability pay, strike or supplemental unemployment
benefits (SUB pay)
• Interest and dividend income including nontaxable interest income
• Net business income if greater than zero
• Net royalty or rent income if greater than zero
• Farmland preservation tax credit
• Pension income, annuity benefits, and IRA and deferred compensation distributions to the
extent they are included in AGI
• Rollovers from a traditional IRA to a Roth IRA in the year the income is included in AGI
• The amount of a qualified distribution from a Roth IRA in excess of a taxpayer’s contributions to
the Roth IRA
• Capital gains less capital losses (including nontaxable gain from the sale of a home). Losses
cannot exceed $3,000 if single or married filing jointly or $1,500 if married filing separately
• Alimony received due to a divorce granted prior to 2019
• Child support and foster parent payments
• Social Security, supplemental security income (SSI), railroad retirement benefits and retirement
survivors, and disability insurance (RSDI) benefits received by the taxpayer, the taxpayer’s
spouse, or minor child
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• The amount over $300 of total awards, prizes, lottery, bingo or gambling winnings received
during the year
• Unemployment compensation and trade readjustment allowances (TRA) benefits
• The amount over $300 of total gifts of cash or goods received during the year including all
payments made on the taxpayer’s or taxpayer’s spouse’s behalf by relatives, friends, and/or
other individuals except government payments made directly to third parties such as an
educational institution or housing authority
• Inheritance (except from the death of a spouse) or proceeds of a life insurance policy paid on
death of the insured (except from the death of a spouse)
• Scholarships, stipends, grants, and payments made directly to an educational institution, except
government payments
• Worker’s compensation benefits paid as compensation for personal injuries, sickness, or death,
and veteran’s payments for disability, pension, or mustering out
• Cash assistance from a Family Independence Program and DHHS benefits not including food
assistance
• Cash assistance from the Department of Education for the payment of childcare
• Compensation received for damages to character or for personal injury or sickness
• Death benefits paid by or on behalf of an employer
• Housing allowance for ministers or clergy
• Forgiveness of debt, even if excluded from AGI (for example, mortgage foreclosure)
• Reimbursement from dependent care and/or medical care spending accounts
• Foreign earned income excluded from federal gross income.
• Paycheck Protection Program loan forgiveness
Total household resources do not include (partial list):
• Net operating loss deductions taken on the federal return
• Payments received by participants in the foster grandparent or senior companion program
• Energy assistance grants or tax credits
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• Government payments to a third party (for example, Medicaid payments to a doctor, tuition
grants, including GI bill, paid directly to an educational institution by a federal or State agency,
and most payments from The Step Forward Michigan program)
• Money received from a government unit such as the Federal Emergency Management Agency
to repair or improve the 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 the household
member’s behalf by parents, relatives, or friends
• Amounts deducted from Social Security or Railroad Retirement benefits for Medicare premiums
• Health and accident insurance premiums the taxpayer or taxpayer’s spouse paid for their
family’s plan
• Employer’s contributions to life, accident, or health insurance plans
• Loan proceeds
• Inheritance or life insurance proceeds from the death of a spouse
• Payments from a long-term care policy made to a nursing home or other care facility.
• Economic Impact Payments
NOTE: Any net business loss after netting all business income and loss, net rental and royalty loss,
and any carryback or carryforward of a net operating loss (NOL) as defined in Section 172
(b)(2) of the Internal Revenue Code, cannot be included in total household resources.
The following may reduce THR as “Other Adjustments,” taken from the adjustments to income portion
of U.S. Schedule 1, Form 1040:
• Payments made to an Individual Retirement Account (IRA), Keogh (HR10), SEP, or Simple Plans
if deducted from federal AGI.
• Student loan interest deduction
• Health savings account deduction
70
• Medical insurance/HMO premiums claimant paid
• Moving expenses when moving into Michigan (members of the Armed Forces only)
• Deduction for self-employment tax
• Self-employed health insurance deduction
• Penalty on early withdrawal of savings
• Alimony paid if deductible on your U.S. Form 1040
• Educator expenses
Add back to AGI:
• Any net business loss after netting all business income and loss.
• Any net rental or royalty loss
• Any carryback or carryforward of a federal net operating loss.
The adjustments claimed should be supported by including a copy of U.S. Schedule 1, Form 1040.
Medical insurance/HMO premiums that the claimant paid are entered separately from “Other
Adjustments” (do not include health insurance premiums paid by employee payroll deductions (pre-
tax)).
NOTE: Any health insurance premiums paid, in whole or in part, by the claimant and not by the
employer for both claimant and family are deductible from gross income to arrive at THR (does
not include premiums paid with pre-tax employee payroll deductions). The filer may not claim
protection insurance premiums for monetary compensation if they acquire a specific disease or
becomes disabled. Also, a deduction may not be taken for insurance premiums covering the
cost of nursing home or in-home care. The taxpayer may claim the portion of an auto
insurance policy that covers medical coverage.
See instruction booklet for additional information. Refer to Income and Deductible Items, Summary
Chart in this publication, for other items which may or may not be included in THR.
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TOTAL HOUSEHOLD RESOURCES CALCULATION
Example 1: For 2023, Judy has wages of $29,000, nontaxable child support of $6,000, and a net loss
of $8,000 for the rental of a second home she owns. Judy’s 2023 federal AGI is
$21,000, which is her $29,000 in wages, less the $8,000 rental loss.
Judy’s 2023 total household resources are calculated as follows:
AGI
$21,000
Add back Net Rental Loss
8,000
Child Support
6,000
Total Household Resources
$35,000
Example 2: For 2023, Bob and Martha have wages of $26,000, business income of $10,000
reported on federal Schedule C, a farm loss of $12,000 reported on Schedule F, and a
rental loss of $4,000 reported on Schedule E. They have no other taxable or
nontaxable income. Bob and Martha’s federal AGI is $20,000, which consists of
$26,000 in wages, $10,000 in business income (Schedule C), a $12,000 farm loss
(Schedule F), and a $4,000 rental loss (Schedule E).
Bob and Martha’s 2023 total household resources are calculated as follows:
AGI
$20,000
Add back Net Business Loss
*2,000
Add back Net Rental Loss
4,000
Total Household Resources
$26,000
* Business Income $10,000 – Farm Business Loss ($12,000) = $2,000 Net Business Loss.
REPORTED THR LOWER THAN REPORTED LIVING EXPENSES
THR must be sufficient to pay property taxes or rent plus all other living expenses unless there are
resources available not reportable in THR. If income appears too low to cover reported living expenses,
include an explanation of the extenuating circumstances. General questions may be asked of the
taxpayer to obtain additional information.
Example: A claimant comes into the office with W-2s showing total wages of $2,500 which they
claim to be the only income received for the year. This claimant also shows you rent
receipts totaling $3,000. Upon questioning the claimant, you discover the claimant
has three children and claims no other money was received during the year. The claimant
spent $3,000 towards rent but only had income of $2,500 and the claimant would have
incurred other living expenses to maintain the household as well.
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The following are some questions you might ask the claimant to ascertain other possible sources of
income:
• Did you receive ANY other income during the year from other sources, such as child
support, loans, cash advances, and/or inheritance?
• Did you receive food stamps or other non-cash assistance during the year?
• Did you share living expenses with anyone else (rent, food, etc.)?
• Did you receive gifts of cash or were expenses paid on your behalf by friends or relatives?
• Do you have a savings account that you are using for living expenses?
State returns suspected to contain false information should be sent to the Treasury Discovery and Tax
Enforcement Division, with a note of explanation.
You may call 517-636-4157 with your concerns or you may email or mail your concerns and all
pertinent information to:
Discovery and Tax Enforcement
Michigan Department of Treasury
Attn: Fraud Unit
P.O. Box 30140
Lansing, MI 48909
CREDIT COMPUTATION METHODS
This section discusses how to compute a property tax credit. If the claimant is eligible for more than
one method, choose the method that produces the largest credit.
All filers must reduce the computed property tax credit by 10 percent for every $1,000 (or part of
$1,000) that THR exceeds $58,300. A property tax credit is not available to any filer whose total
household resources exceed $63,001.
The credit computation methods are:
• General claimant
• Paraplegic, quadriplegic, hemiplegic, totally and permanently disabled, blind, or deaf persons
• Senior citizen – regular method
• Senior citizen - alternate rent credit method (rent larger than 40 percent of THR)
• Service persons or veterans or their widow(er)
• Blind homeowners
• FIP recipient
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GENERAL CLAIMANT
Qualifications
This method is available when the claimant or spouse does not qualify for any other method or when
the taxpayer or spouse does qualify for one or more of the other methods but the other method(s)
results in a smaller refund or credit.
Method of Computation
The credit is equal to 60 percent of the amount by which property taxes or 23 percent of the rent paid
exceeds 3.2 percent of THR, subject to a credit maximum of $1,700 and phase-out limitations.
Example:
Homeowner
Renter
$4,200
Property Taxes
$900
Rent/Year
x 0.23
966
THR
$ 9,500
x 0.032
THR
$ 9,500
x 0.032
Amount not
Refundable
-304
Amount not Refundable
- 304
596
662
Balance
Balance
x 0.60
x 0.60
Credit
$358
Credit
$397
NOTE: A general claimant will always apply 3.2 percent to THR, even when the THR is $6,000
or less.
PARAPLEGIC, QUADRAPLEGIC, HEMIPLEGIC, DEAF, BLIND, OR TOTALLY AND
PERMANENTLY DISABLED PERSONS
Qualifications
See Definitions of Michigan Special Exemptions section in Chapter 2.
Method of Computation
The credit equals the amount by which property taxes or 23 percent of the rent paid exceeds 3.2
percent of THR, subject to a credit maximum of $1,700 and phase-out limitations. The 60% reduction
does not apply. The following examples illustrate the computation for both the homeowner and the
renter.
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Example:
Homeowner
Renter
$4,000
Property Taxes
$620
Rent/Year
x 0.23
920
THR
$ 8,000
x 0.032
THR
$ 8,000
x 0.032
Amount not Refundable
-256
Amount not Refundable
-256
Credit
$364
Credit
$664
NOTE: If THR is $6,000 or less, substitute the 3.2 percent with the lower percentage found in
the MI-1040 instruction booklet.
A homeowner who is blind should also complete Form MI-1040CR-2 and submit the
form that results in the larger credit.
SENIOR CITIZEN - REGULAR METHOD FOR HOMEOWNER OR RENTER
Qualifications
A claimant is eligible for this method if either they or their spouse is 65 or over, and they rent or own
their homestead.
Method of Computation
For seniors with total household resources of $21,000 or less, the credit is equal to 100 percent of the
amount by which property taxes or 23 percent of the rent paid exceeds 3.2 percent of THR. The credit
is reduced by four percent once THR exceeds $21,000, down to 60 percent of the credit once THR
exceeds $30,000. Lastly, a $1,700 credit maximum and phase-out limitations apply.
In the following example, the 0.64 and 0.60 used to reduce the balance is taken from “MI-1040CR
Table A – Senior Credit Reduction”, based on THR.
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Example:
Homeowner
Renter
$8,400
Property Taxes
$ 3,400
Rent/Year
x 0.23
1,932
THR
$ 29,360
x 0.032
THR
$29,360
x 0.032
Amount not Refundable
-940
Amount not Refundable
-940
Balance
2,460
x 0.64
Balance
992
x 0.64
Credit
$1,574
Credit
$635
NOTE: If THR is $6,000 or less, substitute the 3.2 percent with the lower percentage found in
the MI-1040 instruction booklet.
SENIOR CITIZEN - ALTERNATIVE METHOD FOR RENTER
(RENT GREATER THAN 40% OF THR)
Qualifications
A claimant is eligible for this method if they or their spouse is 65 or older, and they rent their
homestead.
Method of Computation
The credit is equal to the amount by which the annual rent paid exceeds 40 percent of the THR,
subject to a credit maximum of $1,700. The illustration below compares this method to the regular
method for a senior citizen.
Example:
Regular Method
Alternate Method
$6,000
Rent/Year
x 0.23
Rent/Year
$6,000
1,380
THR
$ 8,500
THR
$ 8,500
x 3.2%
x 0.032
x 40%
x 0.40
Amount not Refundable
-272
Amount not Refundable
-3,400
Regular Method Credit
$1,108
Alternate Method Credit
$2,600*
* Use the Alternate Method calculation for the greater credit amount. The credit is limited to
a $1,700 maximum.
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SERVICE PERSONS, VETERANS, OR THEIR WIDOW OR WIDOWER
Qualifications
A serviceman, servicewoman, veteran, and their widow or widower who owns a home and meets one
of the following descriptions is entitled to use a special Taxable Value (TV) calculation (Form MI-
1040CR-2):
1. Veteran with service-connected disability or widow or widower
2. Widow or widower of a veteran deceased in service
3. Veteran of war before World War I or widow or widower
4. Pensioned veteran or widow or widower
5. Active serviceperson or widow or widower
6. Widow or widower of a nondisabled or non-pensioned veteran of Korea, World War II or
World War I.
To qualify under categories 3 through 6 above, the claimant cannot have THR greater than $7,500.
FIP/MDHHS benefits must be included in the THR.
Method of Computation - Homeowner
The credit calculation for an eligible serviceman, servicewoman, veteran, widow, or widower is:
TVA
x
Property Tax
=
Credit
TV
The taxable value allowance (TVA) for each category of serviceman, servicewoman, veteran, widow, or
widower is provided in the MI-1040CR-2 instruction booklet.
To determine the refundable percentage for TVs, divide the TVA by the TV.
Method of Computation - Renter
The following formula is used to compute the TV:
23% of Rent Paid *
=
TV
Combined Millage Rate of the
Locality of the Homestead
(Non-homestead rate must be
used)
*Service fee housing residents use 10%
77
Example: Martin Barnum is a 70 percent disabled veteran. He lived all year in an apartment and
paid $250 per month in rent. The combined county and city millage rate on the property
is 56 mills (.056). Mr. Barnum’s property tax credit is calculated as follows:
1. Property tax included in rent:
Monthly Rent
$ 250
x 12
Annual Rent
3,000
x 0.23
Property Tax
$ 690
2. TV:
Property Tax Divided by Combined Millage Rate
=
TV
$690
=
$12,321
0.056
3. TVA for a 70 percent disabled veteran is $4,000. (See Form MI-1040CR-2 instruction
booklet.)
4. Percent of taxes refundable from
TVA
=
$ 4,000
=
32.46%
TV
$12,321
5. Property Tax Credit:
23% of Annual Rent multiplied by % of Taxes Refundable
=
Allowable Credit
$690
x
32.46%
=
$224
BLIND PERSON
Qualifications
To use the following method, a person must qualify as blind under Michigan Compiled Law (MCL)
206.504(1). Generally, this is vision of 20/200 or less in the better eye with corrective lenses, or
peripheral field vision of 20 degrees or less.
Method of Computation
The credit calculation for a blind person is:
78
TVA
x
Property Tax
=
Credit
TV
The TVA for the following categories of blindness is:
Claimant
TVA
Blind individual
$3,500
Husband and wife (one blind)
3,500
Husband and wife (both blind)
7,000
A blind claimant who is a homeowner may use the TVA/TV method. A blind claimant who is a renter
may not use Form MI-1040CR-2.
PUBLIC ASSISTANCE/ MICHIGAN DEPARTMENT OF HEALTH and HUMAN SERVICES
BENEFITS RECIPIENT
Qualifications
An individual whose only income is from Michigan Department of Health and Human Services (MDHHS)
is not eligible for a homestead property tax or rent credit. Assistance payments include FIP and State
Disability Assistance (SDA). A taxpayer who received other income in addition to these benefits may be
eligible to file for the credit.
Method of Computation
Prorate the credit for an MDHHS recipient by using the ratio (percentage) of non-MDHHS income to
total THR. To prorate the credit, use the information from your form to complete “MI-1040CR
Worksheet 4: FIP/MDHHS Benefits” in the MI-1040 instruction booklet.
Example: Jane Canton earned wages of $4,000 and received MDHHS payments of $6,000 during
the tax year. She will receive a credit equal to 40 percent of the property tax credit.
Non-MDHHS Income (Wages)
=
$4,000
=
40%
THR
$10,000
If her property tax or rent credit computed to $400, she would receive a reduced credit
of $160 ($400 x 40%).
Child Support
Subtract child support payments included in the MDHHS benefits from the amount on the MDHHS
statement when calculating the non-MDHHS income. Include the child support as other income when
computing the ratio of non-MDHHS income to total THR.
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Example: Jane Canton informs you that she has wages of $4,500 and she receives child support.
She should obtain a Fourth Quarter child support statement from the Friend of the
Court indicating the amount of child support (rebates) paid. If the statement indicates
the father of the children paid $2,000 in child support, compute the percentage as
follows:
MDHHS
$6,000*
Less: Child Support per Statement from Friend of the
$2,000
Court
Remaining MDHHS income
$4,000
Wages + Child Support
=
$4,500 + $2,000
=
62%
THR
$10,500
* From prior examples
In this example, Jane can claim 62 percent of the credit. Make the following three
entries on the total household resources schedule:
Wages
$4,500
FIP/MDHHS
4,000
Child Support
2,000
Total THR
$10,500
Include the annual statement from Friend of the Court, FEN-851, and, if available, a copy of the annual
statement from MDHHS with Form MI-1040CR or MI-1040CR-2, whichever is being completed. The
FEN-851 form may be attached as a PDF to an e-filed return.
SPECIAL SITUATIONS
Married - Joint Filers, Separate Homesteads
A claimant may file for one 12-month period. If a married couple files a joint return, they are
considered one claimant and must file a joint property tax credit even when they maintain separate
homesteads. They may claim only one homestead and must include their total combined THR.
Married - Separate Filers, Joint Homestead
If a married couple file separate federal and Michigan returns and maintain a joint homestead they
must:
1. Enter combined THR.
2. Enter total property taxes and/or rent paid for the year.
3. Split the credit between spouses.
4. Include a copy of the CR form with each return.
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Example: Jason and Ruth Gordon (husband and wife) maintain one homestead at 111 Main Street,
Anytown, Michigan. They filed separate federal and Michigan income tax returns.
Their only income is wages. Jason earned $35,000 and Ruth earned $17,500. Property
taxes on their home are $2,525. The correct homestead property tax credit is computed
as follows:
Jason’s Wages
$35,000
Ruth’s Wages
17,500
Combined THR
$52,500
Homestead Property Tax
$2,525
Less 3.2% of THR
(0.032 x $52,500)
-1,680
Property Tax eligible to claim
845
x 60%
x 0.60
Homestead Property Tax Credit
$507
The total of the Gordons’ property tax credit cannot exceed $507. If the Gordons elect to
split the credit evenly, include a copy of the claim showing each spouse’s share of the
credit with each income tax return.
Married - Separate Filers, Separate Homesteads
If a married couple file separate federal and Michigan returns and maintain separate homesteads for
the entire year, they must:
1. Determine that each spouse has established their own separate domicile (homestead). See
the Who May Claim a Property Tax Credit Section in the Form MI-1040 instruction booklet.
2. Each separately compute their own THR.
3. Each claim only the property taxes and/or rent paid on their own homestead.
Divorced or Separated Filers
If a married couple separates or obtains a divorce during the year, each party usually establishes a
separate homestead. The rules for determining homestead property tax credit for each claimant are:
1. Each claimant is entitled to claim a prorated share of the taxes or rent paid for the
period they shared a homestead prior to separation or divorce, based on each claimant’s
income to total income for the period.
2. In addition, each claimant is entitled to claim their own prorated property tax or rent paid
after separation or divorce.
3. If applicable, a claimant must include house payments or rent paid by the other claimant
in THR.
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Example: A husband and wife separated on May 1. The property taxes on the marital home are
$800. The husband continued to pay the mortgage on the home of $225 per month. In
addition, he rented an apartment for $200 per month from May 1 through December 31.
His income for the period prior to divorce is $4,000, and her income is $2,000.
Husband:
1. Ratio of Months
in Year Lived
with Spouse
x
Property
Tax
x
Husband’s Income
Total Income
=
Prorated Property
Tax for Period
Living Together
Prior to Divorce
4/12
x
$800
x
$4,000
$6,000
(0.667)
=
$178
2. No. of Months
Rented
x
Monthly
Rent
x
23%
=
Property Tax
Rent
in
8
x
$200
x
0.23
=
$368
3. Prorated
Property Tax for
Period Living
Together
+
Tax in
Rent
=
Eligible Property
Taxes plus Tax in
Rent
$178
+
$368
=
$546
Wife:
1.Ratio of Months
in Year Lived
with Spouse
4/12
2. Remainder of
Months per Year
x
x
x
Property Tax
$800
Property Tax
x
x
Wife’s Income
Total Income
$2,000 (.333)
$6,000
=
=
=
Prorated Property
Tax for Period
Living Together
Prior to Divorce
$89
Prorated
Property Tax
8/12
3.Prorated
Property Tax for
Period Living
Together
$89
x
+
+
$800
Prorated
Property Tax
$533
=
=
=
$533
Total Eligible
Property Taxes
$622
The wife must include $1,800 in THR because her husband paid the monthly mortgage payments of
$225 for eight months after the separation ($225 x 8 = $1,800).
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Form 5049 - Married Filing Separately and Divorced or Separated Claimants Schedule
Form 5049 Worksheet for Married Filing Separately and Divorced or Separated Claimants is required to
be included when:
• The claimant and spouse are married filing separately and maintained separate homesteads all
year.
• The claimant and spouse are married filing separately and shared a homestead all year.
• The claimant and spouse married during the tax year, are married filing separately, and
maintained separate homesteads for part of the year.
• The claimant and spouse separated or divorced in the tax year and maintained separate
homesteads for part of the year.
Part-Year Resident
If the claimant resided in Michigan for at least six months of the year of the claim:
• Enter THR received during the time claimant resided in Michigan. It may be necessary to
annualize THR to determine if income exceeds phase-out limit. See Annualized Total Household
Resources in this chapter.
• Enter rent paid or prorated property tax for length of time claimant occupied a Michigan
homestead. See Homeowner, Part-Year for proration of property tax in this chapter.
• The maximum credit limit of $1,700 shall be reduced proportionately based on days of
occupancy for part-year occupancy. See Maximum Credit Limit for Deceased Taxpayers in this
chapter.
NOTE: Business income and /or losses that occurred in another state must be included in
Michigan THR, based on the ratio of the number of days the claimant was a Michigan
resident to 365 days.
Deceased Claimant, Single Individual
If filing for a deceased claimant with no surviving spouse:
• Enter THR received up to the date of death. See Annualized Total Household Resources in this
chapter.
• Enter prorated property taxes or use the amount of rent paid to decedent’s date of death.
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• The maximum credit limit of $1,700 shall be reduced proportionately based on days of
occupancy for part-year occupancy. See Maximum Credit Limit for Deceased Taxpayers in this
chapter.
NOTE: The heir, personal representative, or person (other than spouse) filing for a decedent must
file Form MI-1310 with the claim. This form may be attached as a PDF to an e-filed return.
Annualized Total Household Resources
A property tax credit claim made by a part-year resident or on behalf of a deceased taxpayer (unless
claimed by surviving spouse) requires annualization of the THR to determine if their annualized THR:
1. Exceeds the threshold of $67,300, which phases out a property tax credit, or
2. May require a senior citizen or a totally and permanently disabled person to use a higher
percentage of THR to determine nonrefundable portion of property taxes.
In the final computation, only the claimant’s actual THR is used.
To annualize THR, compute income as follows:
# Days in the Year
=
Annualized Rate
x
Michigan THR
=
Annualized Income
# of Days in Michigan
Example: A claimant and spouse were residents of Michigan for 212 days of the tax year and
had THR of $20,417 during their Michigan residency. Compute their annualized income
as follows:
365
=
1.722
X
$20,417
=
$35,158
212
Annualized income is used to determine limits and phase-outs. Use actual THR when computing the
amount of the credit.
Maximum Credit Limit for Deceased Taxpayers
For most claimants, the maximum credit limit is $1,700. But, if a part-year credit is being filed (for a
deceased taxpayer), the maximum credit of $1,700 shall be reduced proportionately based on days of
occupancy.
To reduce the maximum credit limit of $1,700 proportionately based on days of occupancy:
Step 1: Divide the number of days of occupancy the taxpayer was a Michigan resident by the
number of days in the year.
Step 2: Multiply $1,700 by the result from Step 1. The result is the maximum credit.
84
Example: Jane was a senior citizen who passed away on May 15
th
and paid rent. Using Jane’s total
household resources and 5 months of rent, her credit computes to $425; however, Jane
qualifies to compute the Alternate Property Tax Credit for Renters Age 65 or Older. Using
the Alternate Property Tax Credit for Renters Age 65 or Older, the credit computes to
$750.
Step 1: 135 days / 365 days = .37
Step 2: $1,700 x .37 = $629
Jane’s $750 computed credit exceeds her maximum allowed credit of $629, therefore,
$629 is entered on line 44 of her MI-1040CR.
Owner-Occupied Rental Property
If a claimant owns and lives in a multiple dwelling homestead and rents a portion of it, not all the
property tax can be claimed for credit.
NOTE: School operating taxes are only levied on the non-homestead portion of the property and may
not be included in taxes levied when computing the property tax credit.
Owner-occupied duplexes
When both units are equal, the taxes that can be claimed are limited to 50 percent of the property tax
on both units, after subtracting the school operating taxes from the total taxes billed. This method is
also followed for homeowners whose principal residence exemption (PRE) is 50% or less.
Owner-occupied income property
Apartment building owners who live in one of the units or single-family homeowners who rent a
room(s) to a tenant(s) must do two calculations to figure the property tax they can claim and base their
credit on the lower amount. First, subtract 23 percent of the rent collected from the property tax that
can be claimed for credit. Second, reduce the property tax claimed for credit by the amount of
property tax claimed as a business deduction on U.S. Form 1040. This method is also followed for
homeowners whose PRE is 51% or above.
85
Example: A home has an upstairs apartment that is rented to a tenant for $395 a month.
Total property taxes on the home are $2,150. The calculations are as follows:
Step 1: $395 x 12 = $4,740 Annual Rent
$4,740 x 0.23 = $1,090 Taxes Attributable to the Apartment
$2,150 Total Taxes - $1,090 = $1,060 Taxes Attributable to Owner’s Homestead
Step 2: $2,150 Total Taxes - $858 Taxes Claimed as a Business Deduction by the Owner on
His Federal Income Tax Return = $1,292 Taxes Attributable to Homestead
The owner may claim $1,060 of property taxes for the credit, the smaller of the two
computations.
Adults Sharing a Homestead
Two or more unrelated adults may be entitled to claim a property tax credit as explained next.
1. If one of the individuals signed the lease and makes all payments or owns the homestead
and pays the property tax, only that adult is entitled to claim a credit on the total property
tax or rent paid. If the other person(s) contributes to the household, that amount must be
included in the claimant’s THR. Include it as gifts received or expenses paid on your behalf.
OR
2. If each of the adult occupants owns the homestead or is contracted to pay a share of the
rent, each is a claimant, and each is entitled to file a claim based on their own THR and
their share of the taxes or rent paid.
Example: A claimant owns and occupies a homestead that she shares with her two adult children.
Neither child paid rent or room and board, but both contribute to their mother’s total
household resources. Since the children are not owners of the home nor did they contract
to pay rent, they are not claimants. The mother is entitled to claim all the property taxes
when computing her homestead property tax credit. She must include the children’s
contributions in THR as gifts received or expenses paid on her behalf.
86
CHAPTER 4 – HOME HEATING CREDIT (FORM MI-1040CR-7)
GENERAL INFORMATION
INTRODUCTION
A home heating credit helps low-income families pay their heating costs. This credit is claimed on
Form MI-1040CR-7.
NOTE: Michigan’s home heating credit is funded by federal Low-Income Home Energy Assistance
Program Grants. The credit for 2023 may be reduced if the grant from the Low-Income Home
Energy Assistance Program has been reduced.
Do not attach Form MI-1040CR-7 to Form MI-1040. The home heating credit cannot offset an income
tax liability. If Form MI-1040CR-7 is attached to Form MI-1040, it may cause delays in processing the
credit.
Under Public Act 335 of 2004 for certain claimants, the amount of a credit that exceeds outstanding
heating bills must be applied by the energy provider to subsequent bills until used up or until nine
months has passed. If there is any remaining energy draft amount after the nine- month period (or if
the claimant is no longer a customer of the provider before the end of the nine-month period), the
heating fuel provider must remit payment to the claimant within 14 days. This applies only if the
claimant was an MDHHS recipient or received home heating assistance from a governmental agency or
a nonprofit organization 12 months prior to remitting an energy draft to the claimant’s enrolled
heating fuel provider.
As a result of this legislation, taxpayers who receive their heat from DTE Energy, Consumers Energy, or
SEMCO Energy will have their home heating credit sent directly to their heat provider whether or not
they are enrolled in MDHHS’s direct payment program.
INSTRUCTIONS
Read the MI-1040CR-7 instruction booklet. The following information will recap and/or further explain
the instructions in the booklet (“Instructions” refers to the booklet used to prepare Form MI-1040CR-
7).
WHEN TO FILE A CLAIM
A home heating credit claim must be filed by September 30 of the year following the year of the claim.
Extension requests are not valid.
ELIGIBILITY
Who May Claim a Credit
A credit may be claimed if each of the following is true for the tax year:
87
• Taxpayer’s homestead is in Michigan.
• Taxpayer owned or rented the home where they lived.
• Taxpayer’s total household resources (THR) are within the income limits listed in the
instruction booklet.
Who May Not Claim a Credit
A home heating credit cannot be claimed if:
• Taxpayer was a full-time student claimed as a dependent by another person.
• Taxpayer was a resident of a licensed congregate care facility (e.g., nursing home, adult
foster care home, home for the aged, substance abuse center, etc.).
Exceptions: A claimant who did not reside in a licensed congregate care facility for the full tax
year may claim a home heating credit based on a proration of the standard
allowance. If the claim is for less than 12 months, only the standard credit
method can be used.
If one spouse lived in a licensed congregate care facility and the other spouse
lived in the family homestead, they may still qualify for a credit.
IDENTIFYING INFORMATION
Do not mark through, cross out, etc., any box that does not apply to the claimant. Instead, leave the
box blank.
CITIZENSHIP STATUS
Check each box to indicate if the filer and/or spouse is a U.S. citizen or qualified alien. Qualified alien
means an individual who is lawfully admitted for permanent residence under the Immigration and
Nationality Act and all others as defined under 8 USC 1641.
HEAT PROVIDER AND HEAT TYPE CODE
Enter the heat provider name code and heat type code from the MI-1040CR-7 instructions.
FILING STATUS
Check the applicable box for the claimant’s filing status as of the end of the tax year. See the
instruction book for further details.
RESIDENCY STATUS
Check all applicable boxes, if one spouse is a resident and the other spouse a nonresident or
part-year resident, check the appropriate box for each spouse.
88
HOW MUCH WERE YOU BILLED FOR HEAT?
Enter total heating costs for November 1, 2022, through October 31, 2023, on the applicable line.
If the taxpayer’s heating bill does not indicate the amount, the taxpayer should call their heat provider.
Leave this line blank if the claimant:
• Checked the box indicating that heating costs are included in their rent.
• Died during the tax year and is not filing a joint claim
• Was a part-year resident
• Was not billed for 12 months of heating costs between November 1, 2022, and October 31,
2023.
CARE FACILITY
Check one box only (a–d) on line 15 if the claimant lived in a licensed care facility for the entire tax
year. Do not check a box if the taxpayer is filing a joint return and only one spouse lived in a care
facility.
EXEMPTIONS
Enter the number that applies on the appropriate line using the following definitions:
a. Personal Exemption. (Claimant and spouse.)
b. An exemption(s) may be entered for the claimant, spouse, and each dependent of the
claimant who is:
• Deaf – Defined as an individual whose hearing is totally impaired or whose
hearing, with or without amplification, is so seriously impaired that the
primary means of receiving spoken language is through other sensory input,
including but not limited to lip reading, sign language, finger spelling, or
reading).
• Disabled – Hemiplegic, paraplegic, quadriplegic, or totally and permanently
disabled. Totally and permanently disabled means disabled as defined under
the Social Security Guidelines (see Title 42 § 416 of the U.S. Code).
NOTE: An exemption for totally and permanently disabled cannot be claimed on
the home heating credit for a claimant, spouse, or dependent who is 66
years of age or older by Junet 30, 2023.
• Blind – Defined as a permanent impairment of both eyes of the following
status: central visual acuity of 20/200 or less in the better eye with corrective
glasses, or central visual acuity of more than 20/200 if there is a field defect in
which the peripheral field has contracted to such an extent that the widest
diameter of visual field subtends an angular distance of not greater than 20
degrees in the better eye.
89
c. Qualified Disabled Veteran – Veteran with a service-connected disability. Defined as a
veteran of the active military, naval, marine, coast guard, or air service who received an
honorable or general discharge and has a disability incurred or aggravated in the line of
duty as described in 38 U.S.C. § 101(16).
d, e, f. Enter number of children that lived with the claimant:
• An exemption can be claimed on Form MI-1040CR-7 for any child(ren) that
lived with the claimant.
• An exemption cannot be claimed on Form MI-1040CR-7 for any child(ren)
that did not live with the claimant, even if the claimant paid most of
the support and is entitled to an exemption(s) on Form MI-1040.
g. Enter the number of dependent adults other than claimant’s spouse who lived with the
claimant (including child(ren) over 18) and for whom the claimant provided more
than half of the dependent’s support.
DEPENDENTS AND HOUSEHOLD MEMBERS
For every exemption claimed for child(ren) or dependent adults other than the spouse, the following
information for each person must be listed: name, Social Security number, and age in years (enter 1 if
less than one year of age). Additionally, enter the name, Social Security number, and age of every
household member. A household member is anyone living with you that is not listed as an exemption
on line 16. See the instruction booklet for further details. Check all the boxes in column D that apply.
If more space is needed, complete the Michigan Home Heating Credit Claim MI-1040CR-7
Supplemental (Form 4976).
COMPUTATION
TOTAL HOUSEHOLD RESOURCES (THR)
Total household resources (THR) is the total income of a single person or a married couple who
maintain a household. It is made up of taxable and nontaxable income. It is the federal adjusted gross
income (AGI) plus income that is specifically excluded or exempt from the computation of AGI, and
increased by the following deductions from federal gross income:
1. Any net business loss after netting all business income and loss
2. Any net rental or royalty loss
3. Any carryback or carryforward of a net operating loss (NOL) as defined in Section
172(b)(2) of the internal revenue code
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Example 1: Mr. and Mrs. Smith have total wages of $7,500 and interest of $250. Federal AGI was
$7,750. Mrs. Smith receives child support of $3,500 (which is not taxable) from a
previous spouse. Total household resources are $11,250.
Example 2: Ms. Jones has a rental loss of $1,350, retirement benefits of $2,400, and nontaxable
Social Security benefits of $12,084. Her federal AGI was $1,050. Total household
resources are $14,484.
STANDARD CREDIT OR ALTERNATE CREDIT COMPUTATION:
WHICH METHOD TO USE
A standard credit is computed based on the number of exemptions and THR.
The alternate credit is computed based on THR and total heating costs.
If the claimant currently does not contract to pay heating costs, use the standard credit.
If the claimant was a part-year resident or filing on behalf of a taxpayer who died in 2023, use the
standard credit.
If the claimant lives in a condominium or apartment and is not contracted to pay for heating costs, use
the standard credit.
If the claimant contracts to pay for heating costs, calculate both methods and claim the larger credit.
STANDARD CREDIT COMPUTATION FOR 2023
The standard credit computation is based on the number of exemptions and THR.
First, the number of exemptions is used to determine the standard allowance from the table below
(the table is also located in the MI-1040CR-7 instruction booklet):
Exemption
Standard Allowance
Income Ceiling
0 or 1
$562
$16,043
2
$760
$21,700
3
$958
$27,357
4
$1,156
$33,013
5
$1,354
$38,671
6
$1,552
$44,329
+ $198 for each exemption over 6
+ $5,657 for each exemption over 6
Example: If eight exemptions are claimed, the standard allowance for 2023 is $1,797 (2 x $198 =
$396+ $1,552 = $1,948).
IMPORTANT: Heating credits may be prorated because the amount of money Michigan receives from
this federal grant varies every year. The proration percentage can be found on the MI-1040CR-7, line
47.
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Renter
If claimants are renters and heating costs are currently included in their rent, the standard home
heating credit is reduced by 50 percent.
Michigan Resident, Full-Year
The following example illustrates how to compute the credit for full-year residents based on the above
table. The table can also be found in the MI-1040CR-7 instruction booklet. If the eligible claimant’s
THR exceeds the income ceiling corresponding to the number of exemptions allowed on the home
heating credit claim, the individual is not eligible for a credit.
Example: John and Mary Smith (a married couple), both 65 years, had total household resources
of $8,200. Mary was totally and permanently disabled at the end of the tax year. They
are entitled to three exemptions on their Home Heating Credit claim.
Standard Allowance for 3 Exemptions
$958
Less 3.5% of Total Household Resources
(0.035 x $8,200)
-287
Home Heating Credit
$671
(subject to possible proration)
If John and Mary rented their homestead and heating costs were included in their rent,
the credit would be computed as follows:
Home Heating Credit (From Above)
$671
Less 50% of the Credit
(0.5 x $671)
-336
(subject to possible proration)
Reduced Home Heating Credit
$335
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Part-Year Resident or Deceased Claimant
The standard allowance is prorated and only the THR received while the claimant was a Michigan
resident is used to compute the credit.
Example: John and Mary Doe (a married couple) moved to Michigan on May 1. They have four
children which entitles them to a total of six exemptions. Their Michigan income is
$14,700.
1. No. of Days in Michigan
x
Standard
Allowance
=
Prorated Standard
Allowance
365 Days
245 = (67%)
x
$1,552
=
$1,040
365
2. Prorated Standard Allowance
$1,040
Less 3.5% of Total Household Resources
(0.035 x $14,700)
-515
Home Heating Credit
$525 (subject to possible proration)
If John and Mary Doe rented their homestead and heating costs were included in their
rent, the home heating credit would be reduced by 50 percent.
Home Heating Credit (From Above)
$525
Less 50%
(0.5 x $525)
-263
Reduced Home Heating Credit
$262 (subject to possible proration)
Adults Sharing a Homestead
If a claimant shares a home but is not the owner or did not have a lease agreement to pay rent, they
cannot claim a credit.
When people who are not spouses own or rent a home jointly, each can claim a home heating credit
based on individual THR and their share of the standard allowance. Determine the standard allowance
from Table A in the MI-1040CR-7 instruction booklet, using the total number of personal exemptions in
the home. Do not include Michigan special exemptions or dependent exemptions in this total. Divide
the standard allowance by the number of claimants in the home.
Example: Three unrelated men share an apartment. Each has a signed lease and pays 1/3 of the
rent. The standard allowance for three exemptions is $888. Each person must use a
standard allowance of $319 ($958÷ 3) to compute his credit.
If eligible for a dependent exemption or for a special exemption for deafness, blindness, disability, or
qualified disabled veteran, compute the standard allowance following this example.
93
Example: Sisters Emma and Ruth share a home. Emma is age 61 and Ruth is age 63 and blind.
They file separate Form MI-1040CR-7 claims. They must first divide the $760 standard
allowance by 2. Emma’s allowance is $380. However, Ruth qualifies for an extra
exemption for blindness. She adds to her share of the standard allowance of $380 the
difference between the standard allowance for three ($958) and the standard allowance
for two ($760) as follows:
$958
-
$760
=
$198
+
$380
=
$578
Allowance for Ruth
The claimants in these situations may want to include a letter of explanation when more than one
individual is claiming a credit for the same address.
Condominium Owner
The owner of a condominium, who does not contract separately for heating costs but pays a
maintenance fee, does not reduce their claim to 50 percent. Leave box 10 blank, do not make an entry
on line 41, and include a letter of explanation.
ALTERNATE CREDIT COMPUTATION FOR 2023
The alternate credit computation is based on THR and total heating costs.
A claimant’s THR may not exceed the maximum income amount corresponding to the number of
exemptions claimed on the form based on the following table. (Table B in the MI-1040CR-7 instruction
booklet.):
Exemptions
Maximum Income
0 or 1
$17,534
2
$23,595
3
$29,661
4 or more
$31,818
Heating Costs
A claimant must report their total heating costs for the 12 consecutive monthly billing periods ending
in October of the tax year. A claimant should contact their enrolled heating provider for this
information. If claimant is not a customer of an enrolled heating fuel provider, use billing statements
to calculate the total cost for the 12 consecutive months ending in October of the tax year. Enter the
total heat cost or the maximum allowed for the credit, whichever is less.
Heating costs include amounts paid for fuel oil, electricity (if homestead has electric heat), gas, coal,
wood, or propane. The cost of wood is the amount spent during the 12 consecutive months ending
sometime in October of the tax year or the fair market value if harvested from property owned by the
claimant.
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Michigan Resident, Full-Year
The following example illustrates how to compute the alternate credit for a full-year resident based on
Table B in the MI-1040CR-7 instruction book.
Example: James and Jean Smith (a married couple) have THR of $13,000 and three exemptions.
Their total heating cost is $1,950. Their THR does not exceed the maximum income
allowed for 3 exemptions.
Fuel Cost
Less 11% of Total Household Resources
(0.11 x $13,000)
Balance
Multiply by 70%
Home Heating Credit
$1,950
- 1,430
520
x 0.70
$364 (subject to possible proration)
Part-Year Resident or Deceased Claimant
The alternate credit is not available for part-year residents or deceased claimants who died during the
tax year. If the claim is for less than 12 months use the standard credit computation.
Adults Sharing a Homestead
If a claimant shares a home but is not the owner or did not have a lease agreement to pay rent, they
cannot claim a credit.
When people who are not spouses own or rent a home jointly, each can claim a home heating credit
based on individual THR.
If the heating costs are in the names of all those who share the homestead divide the heating costs by
the number of claimants in the home and enter that amount in box 14. Complete both the standard
credit and alternate credit computations on page 2; the claimant’s credit is the greater of the two
calculations. Use the shared housing standard allowance when computing the standard credit.
CREDIT PAYMENTS ENERGY DRAFTS OR WARRANTS (CHECKS)
If, at the time of filing, the claimant pays their own heating costs, the taxpayer will receive an energy
draft.
If, at the time of filing, the claimant’s heat is included in rent, the taxpayer will receive a check.
For claimants whose heat is provided by DTE Energy, Consumers Energy, or SEMCO Energy, the home
heating credit will be sent directly to the heat provider. If the credit amount exceeded the heat
account balance, check the box on line 18 to receive a refund from the heat provider for the
overpayment, if eligible. If not eligible, the excess refund will be used toward future bills. If after nine
months there is still unused funds from the heat credit, the heat provider will send the excess refund
to the individual. Eligibility requirements are: 1) no outstanding balance with the heat provider and 2)
no heat assistance received in the past 12 months.
95
DIRECT DEPOSIT
Claimants who will receive the home heating credit payment as a check may choose to direct deposit
the credit payment. Direct deposit information for a Home Heating Credit claim is entered on Form
3174. See the end of the instruction booklet for this form and its instructions. Ask to see proof of the
claimant’s RTN (routing number) and account number. It is important to enter all direct deposit
information accurately.
96
CHAPTER 5 – ADDITIONAL INFORMATION
TAXABILITY OF FEDERAL OBLIGATIONS
Income from certain U.S. Obligations, reduced by any expenses in carrying the obligation used in arriving at
federal AGI, can be subtracted on the Michigan return.
The following U.S. Obligations are exempt from Michigan Individual Income Tax:
U.S. Government Bonds U.S. Saving Bonds - Series EE, HH, and I
U.S. Government Certificates U.S. Treasury Bills and Notes
Note: Treasury Bill Futures are not U.S. obligations.
Obligations issued by the following U.S. Agencies are exempt:
Banks for Cooperatives Federal Intermediate Credit Banks
Central Banks for Cooperatives Federal Intermediate Credit Corp.
Commodity Credit Corp. Federal Land Banks
Consolidated Bonds Federal Land Banks Association
Consolidated Discount Notes Home Owner’s Loan Corp.
Consolidated System Bond, Series L Joint Stock Land Banks
Consolidated Systemwide Maritime Administration
Discount Notes Production Credit Association
District of Columbia Small Business Administration
Farm Credit Banks Student Loan Marketing Association
Farmers Home Corp. Tennessee Valley Authority (bonds only)
Federal Deposit Insurance Corp. U.S. Housing Authority
Federal Farm Credit Bank U.S. Maritime Commission
Federal Farm Loan Corp. U.S. Postal Service (bonds)
Federal Farm Mortgage Corp. U.S. territories/possessions
Federal Financing Banks (obligations Puerto Rico, Virgin Islands, etc.)
Federal Home Loan Banks
Federal Housing Administration
(General Insurance Fund Debentures
The following debentures issued under the General Insurance Fund are exempt:
Armed Services Housing Mortgage Insurance Rental Housing Insurance
Mutual Mortgage Insurance Fund Rental Housing Mortgage insurance
National Defense Housing Insurance War Housing Insurance Fund
Income from exempt U.S. Obligations received by the taxpayer through Money Market Funds, Money
Market Certificates, Mutual Funds, Trusts, etc., generally qualifies for a subtraction.
97
The following U.S. Obligations are taxable:
Building and Loan Associations (Thrifts)
Credit Union Share Accounts
Export/Import Bank of Washington, D.C.
Federal Home Loan Mortgage Corporation (Freddie Mac) mortgages and other securities
Federal Housing Administration
Federal National Mortgage Association (Fannie Mae) participation and other instruments
(debentures, notes, and participation certificates)
Federal Savings and Loan Associations
Government National Mortgage Association (Ginnie Mae) (debentures, notes, and participation
certificates)
International Bank for Reconstruction and Development (World Bank)
Philippine Bonds
Rural Development Insurance Fund
U.S. Government Insured Merchant Marine Bonds
Other examples of taxable interest from federal obligations:
Debentures issued to mortgages or mortgages foreclosed under the provisions of the National
Housing Act
Federal Home Loan Time deposits
Government National Mortgage Association participation certificates and on Federal
Home Loan Mortgage Corporation participation certificates in mortgage pools
Interest-bearing certificates issued in lieu of tax-exempt securities (such that income loses its
identity when merged with other funds)
Participating loans in the Federal Reserve System for member banks (Federal Funds)
Promissory notes of a federal instrumentality
Repurchase agreements
U.S. Postal Service certificates and savings deposits
For additional information, refer to RAB 2020-22 Part 1: Income Tax – Tax Exempt Status of Income
from United States Obligations for Individuals and Fiduciaries.
98
INCOME ALLOCATION CHART
The following chart may be used to determine which types or sources of income are taxable to
Michigan. This chart is not inclusive of all types of income but reflects the most common. Some types
of income may be covered in more detail in Treasury’s most current RABs available on the “Reports
and Legal Resources” page on Treasury’s website.
Type of Income
Allocate To
Salaries, wages, tips, director fees, commissions,
etc.
State where earned and state of residence. A
Michigan resident may be entitled to a credit if
income is also taxed by another state.
Exception: Residents of reciprocal states are not
taxed by Michigan on this type of income and vice
versa.
Deferred compensation:
1. Principal portion
2. Interest portion
State of residence when received.
State of residence when received.
Dividends and interest
State of residence.
Exception: If earned by a partnership or S
corporation, allocate or apportion to the state of
the business activity if business income.
Business income or loss (Schedule C)
State where business activity takes place. Business
income attributable to Michigan and one or more
states must be apportioned. (Form MI-1040H.)
Partnerships, S corporations, or other flow-through
entities income or loss:
1. Ordinary business income or loss
(Schedule E)
2. All other business income or loss
3. Nonbusiness income or loss
State where business activity takes place.
State where business activity takes place.
State of residence
Capital gain or loss (Schedule D or 4797):
1. Intangible personal property such as stocks,
bonds, commodities, futures, etc.
2. Section 1231
3. Real property
State of residence unless business income.
State where the property is located unless business
income.
State where real property is located unless business
income.
99
Type of Income
Allocate To
Pension, retirement, annuity, qualifying IRA
distributions, and Social Security benefits
State of residence when received.
Rent and royalty income or loss (Schedule E):
1. Tangible and intangible personal property
2. Real property (includes royalties for minerals
which came from real property such as oil and
coal)
Michigan if used in this state, or if a resident and not
taxable in the state where property is used.
State where real property is located unless business
income.
Estate or trust income or loss
Look to type and source of income and apply
guidelines in this chart.
Farm income or loss (Schedule F)
State where farm is located.
Unemployment compensation
State of residence.
Alimony and state and local refunds
State of residence when received.
Gambling winnings from casinos and licensed horse
tracks located in Michigan, and winnings from raffle,
bingo, and prizes won in Michigan.
State where earned and state of residence.
(Michigan Lottery won by nonresidents is taxable in
Michigan.)
100
INCOME AND DEDUCTIBLE ITEMS, SUMMARY CHART
Notes: N = Not included
Y = Included
AGI = Adjusted Gross Income
THR = Total Household Resources
Income Items
AGI
Michigan
Taxable
Income
THR
Alimony received for all divorce or separation agreements executed:
Prior to January 1, 2019
After December 31, 2018
Y
N
Y
N
Y
N
Awards, prizes (in excess of $300 for THR)
Y
Y
Y
Bingo:
First $300
In excess of $300
Y
Y
Y
Y
N
Y
Bonuses
Y
Y
Y
Business (Schedule C) income or loss:
In Michigan (except income and related expenses from oil and gas royalties
and metallic minerals extraction subject to severance tax)
From another state and/or income and related expenses from oil and gas
royalties and metallic minerals extraction subject to severance tax
Y
Y
Y
N
Y*
Y*
Capital gains:
100% taxable
Note: Senior Citizen born before 1946 may subtract interest,
dividends, capital gains included in AGI. The maximum
deduction must be reduced by the pension subtraction.
Allowable deduction is the smaller of the calculation or
actual total interest, dividends, and capital gains.
This subtraction is adjusted by the percentage increase in
the U.S. Consumer Price Index for the preceding calendar
year. See MI-1040 instruction booklet for the year being
reviewed.
Gains on sale of principal residence
Casualty loss reimbursement in excess of loss of property
Child support payments:
Payer
Receiver
Chore service payments:
Provider of service
Receiver of service
Y
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
Y
Y
N
N
N
* All business income and loss must be netted before considering the effect on THR. If the netting results in a loss, this cannot
be used to reduce THR. Exception: Farmland Preservation Tax Credit continues to be based on household income and not
THR. Business losses and NOL deductions are allowed in household income. (See MI-1040CR-5 instructions.)
101
Michigan
Taxable
Income Items
AGI
Income
THR
Commissions
Y
Y
Y
Compensation for personal services rendered
Y
Y
Y
Damages for personal injury or sickness
N
N
Y
Deferred compensation
Y
Y
Y
Director’s fees
Y
Y
Y
Disability income (limited)
Y
Y
Y
Policeman and Fireman On-Duty “J-Days”
N
N
Y
Dividends received (see Note under “Capital gains”)
Y
Y
Y
Educational expenses paid by employer
N
N
Y
Employee business expenses: cash allowance or reimbursement
Y
Y
Y
Energy assistance grants or tax credit
N
N
N
Estates or trusts income or loss
Y
Y
Y*
FIP benefits (see “Public assistance…”)
Farm income or loss from:
Michigan
Another state
Farm portion of homestead property tax credit
Farmland preservation tax credits
Foreign earned income exclusion
Foster care payments
Y
Y
Y*
Y
N
Y*
Y
Y
N
Y
Y
Y
N
N
Y
N
N
Y
Gambling:
Winnings (in excess of $300 for THR)
Y
Y
Y
Losses:
Professional gamblers (Net losses)
Y
Y
N*
All others
N
Y**
N
Gift - cash:
First $300
N
N
N
Excess over $300
N
N
Y
* All business income and loss must be netted before considering the effect on THR. If the netting results in a loss, this cannot
be used to reduce THR. Exception: Farmland Preservation Tax Credit continues to be based on household income and not
THR Business losses and NOL deductions are allowed in household income. (See MI-1040CR-5 instructions).
** Deduction limited to wagering losses claimed as an itemized deduction on the federal income tax return for the same period.
For nonresidents, only wagering losses attributable to wagering transactions placed at or through a casino or licensed race
meeting located in this state may be deducted.
102
Michigan
Taxable
Income Items
AGI
Income
THR
Government grant for home repair or improvement
N
N
N
Government payments made directly to educational institutions or
N
N
N
housing projects
Health, life (unless benefits exceed $50,000), and
N
N
N
accident insurance premiums paid by employer
Homestead property tax credits
Y
N
N
Housing allowance for clergy
N
N
Y
Inheritance bequest or devise from:
Non-spouse
Spouse
Interest received on:
Banking, savings and loan assoc., etc., accounts
Insurance dividends
Land contracts
Money market and savings certificates
Municipal bonds issued by another state
Municipal bonds issued by Michigan
Tax refunds
U.S. Obligations (only specific agencies exempt)
Interest taxable to Michigan (see Note under “Capital gains”)
Life insurance proceeds paid to:
Non-spouse
Spouse
Life insurance - cash in amount in excess of premiums
Living expenses of claimant paid by another person
Loans received or paid
Long-term disability payments received
(if all or part of premium paid by employer)
Lottery:
100% taxable (in excess of $300 for THR)
Installment winners of Michigan lottery who won prior to 12-30-88
Lump sum distribution included in 10-year averaging
(for individuals born before 1936)
N
N
Y
N
N
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
N
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
N
N
Y
N
N
N
Y
Y
Y
N
N
Y
N
N
N
Y
Y
Y
Y
Y
Y
Y
N
Y
N
N
Y
* All business income and loss must be netted before considering the effect on THR. If the netting results in a loss, this cannot
be used to reduce THR. Exception: Farmland Preservation Tax Credit continues to be based on household income and not
THR. Business losses and NOL deductions are allowed in household income. (See MI-1040CR-5 instructions.)
103
Michigan
Taxable
Income Items
AGI
Income
THR
Medicare payments
Military wages or retirements
Combat pay not excluded from taxable on federal return
Combat pay excluded from taxable on federal return
Moving expenses, reimbursement:
Moving into Michigan
Moving out of Michigan
N
N
N
Y
N
Y
Y
N
Y
N
N
Y
Y
Y
Y
Y
N
N
Net operating loss deduction (the NOL is allowed in household income
Y
Y
N
when computing the Farmland Preservation Tax Credit)
Partnership income or loss:
In Michigan (except income and related expenses form oil and gas
royalties and metallic minerals extraction subject to Michigan
severance tax)
From another state and/or income and related expenses form oil and
gas royalties and metallic minerals extraction subject to Michigan
severance tax
Paycheck Protection Plan (PPP) Loans forgiven
Pension and retirement benefits from person born after 1945 (Refer to
Pension and Retirement Benefits section of this manual.)
Private pensions (e.g., qualified annuity plans) up to amount allowed as
subtraction for claimed year for persons born before 1946
Private pensions or qualified annuity plans in excess of amount allowed as
subtraction for claimed year for person born before 1946
Public Pensions (federal, state, or municipal governments) for persons born
before 1946
Public assistance payments from MDHHS
FIP paid to grandparents for care of grandchildren
FIP paid to parents for children
Public health officer’s income:
Michigan resident
Nonresident
Y
Y
N
Y
Y
Y
Y
N
N
Y
Y
Y
N
N
Y/N
N**
Y
N
N
N
Y
N
Y*
Y*
Y
Y
Y
Y
Y
Y
Y
Y
N
* All business income and loss must be netted before considering the effect on THR. If the netting results in a loss, this cannot
be used to reduce THR. Exception: Farmland Preservation Tax Credit continues to be based on household income and not
THR. Business losses and NOL deductions are allowed in household income. (See MI-1040CR-5 instructions.)
** This subtraction is adjusted by the percentage increase in the U.S. Consumer Price Index for the preceding calendar year.
(See the MI-1040 instruction booklet for the year being reviewed.)
104
Railroad sick pay
Income Items
AGI
Y
Michigan
Taxable
Income
N
THR
Y
Railroad Tier 1 retirement benefits:
Taxable amount for persons born before 1946
Nontaxable portion
Y
N
N
N
Y
Y
Railroad Tier 2 retirement benefits for persons born before 1946
Y
N
Y
Railroad unemployment benefits
Y
N
Y
Refunds - Michigan state and local income tax
Y
N
N
Relief in kind
N
N
N
Rents and royalties income or loss:
In Michigan (except income and related expenses from oil and gas
royalties and metallic minerals extraction subject to Michigan
severance tax)
From another state and/or income and related expenses from oil and
gas royalties and metallic minerals extraction subject to Michigan
severance tax
Y
Y
Y
N
Y
Y
Note: All rent and royalty income and loss must be netted before
considering the effect on THR. If the netting results in a loss, this
cannot be used to reduce THR.
Retirement benefits (see “Private and Public pensions…”)
Y
N/Y
Y
S corporation business activity:
In Michigan (except income and related expenses form oil and gas
royalties and metallic minerals extraction subject to Michigan
severance tax)
In another state and/or income and related expenses from oil and gas
royalties and metallic minerals extraction subject to Michigan
severance tax
Y
Y
Y
N
Y*
Y*
Scholarships, stipends, education grants, GI bill benefits
N
N
Y
Note: Scholarships must be received and used for qualified tuition and
related expenses such as fees, books, supplies, and equipment
required for courses of instruction at a qualified organization.
Scholarships or grants received and used for nonqualified expenses that
are included in federal AGI such as room and board
Y
Y
Y
* All business income and loss must be netted before considering the effect on THR. If the netting results in a loss, this
cannot be used to reduce THR. Exception: Farmland Preservation Tax Credit continues to be based on household
income and not THR. Business losses and NOL deductions are allowed in household income. (See MI-1040CR-5
instructions).
105
Michigan
Taxable
Income Items
AGI
Income
THR
Severance pay
Sick pay other than railroad sick pay
Social Security benefits:
Taxable amount:
Nontaxable amount:
Stimulus Payments
Stipends received for benefits of grantor
(e.g., interns, residents, doctors, etc.)
Strike Pay
Supplemental gain (Form 4797)
Supplemental unemployment benefits
Surplus foods
Y
Y
Y
N
N
Y
Y
Y
Y
N
Y
Y
N
N
N
Y
Y
Y
Y
N
Y
Y
Y
Y
N
Y
Y
Y
Y
N
Unemployment compensation
Y
Y
Y
Unemployment compensation from railroad
N
N
Y
Vacation Allowance
Y
Y
Y
Veterans Administration benefits
N
N
Y
Wages, salaries, tips
Y
Y
Y
Workers’ Compensation
N
N
Y
106
Deductible Items
AGI
Michigan
Taxable
Income
THR
Alimony paid under a divorce or separation agreement executed prior to
January 1, 2019
Y
Y
Y
Alimony paid under a divorce or separation agreement executed after
December 31, 2018
N
N
N
Capital losses:
Short-term, maximum $3,000 (THR, maximum $3,000)
Long-term, maximum $3,000 (THR, maximum $3,000)
Casualty Loss:
Claimed as itemized deduction
Claimed as business deduction
“Claim of Right”
(repayment of items previously included in income taken as:
Itemized deduction (taken as Michigan credit)
Federal tax credit (taken as Michigan credit)
Deduction reflected in AGI
Y
Y
Y
Y
Y
Y
N
N
N
Y
Y
Y
N
N
N
N
N
N
Y
Y
Y
Health and accident insurance paid by taxpayer for self and family
N
N
Y
(not including pre-tax payroll deductions)
IRA or Keogh, (payments to)
Y
Y
Y
Moving Expenses:
Non-Military related move:
Moving to Michigan
N
N
N
Moving out of Michigan
N
N
N
Military related move:
Moving to Michigan
Y
Y
Y
Moving out of Michigan
Y
N
N
Penalty on early withdrawal of savings
Y
N
Y
Self-employment tax deduction
Y
N
Y
Venture Capital deduction
Y
N
N
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MICHIGAN CITIES LEVYING AN INCOME TAX
The following Michigan cities levy an income tax of 1 percent on residents and 0.5 percent on
nonresidents except those cities where rates are indicated:
Albion
Ionia
Battle Creek
Jackson
Benton Harbor
Lansing
Big Rapids
Lapeer
Detroit (2.4% on residents, 1.2% on
Muskegon
nonresidents)
Muskegon Heights
East Lansing
Pontiac
Flint
Port Huron
Grand Rapids (1.5% on residents, 0.75% on
Portland
nonresidents)
Saginaw (1.5% on residents, 0.75% on
Grayling
nonresidents)
Hamtramck
Springfield
Highland Park (2% on residents, 1% on
Walker
nonresidents)
Hudson
108
