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Does Michigan Tax Your Retirement Income?

On July 12, 2023 / Michigan Taxes

5/5 - (1 vote)

Live in Michigan? Need Tax Assistance? Call ATS Advisors

What are retirement and pension benefits?

A popular question with Michigan Residents is: Does Michigan Tax Your Retirement Income? This is a tricky answer due to many diffferent factors discussed in this article.

Under Michigan law, retirement and pension benefits include most payments that are reported on a 1099-R for federal tax purposes. This includes defined benefit pensions, IRA distributions and most payments from defined contribution plans. Retirement and pension benefits are taxable based on date of birth (see age groups below). Regardless of date of birth, the following are not taxed:

US Military pensions
Michigan National Guard pensions
Social Security
Railroad benefits
Rollovers not included in the Federal Adjusted Gross Income (AGI)

What are Qualified Distributions?

A subtraction is allowed on the Michigan return for qualifying distributions from retirement plans. Retirement plans include private and public employer plans, and individual plans such as IRA’s. To be considered a qualified distribution for the subtraction, several requirements must be met. For employer plans, an employee must have retired under the provisions of the plan, the pension benefits must be paid from a retirement trust fund, and the payment must be made to either the employee or a surviving spouse. (Payments made to a surviving spouse are only deductible if the employee qualified for the subtraction at the time of death.)

For qualifying distributions, there may be a limitation on the amount of the exemption that can be claimed.

What Distributions Do Not Qualify for a Subtraction?

Certain distributions reported on form 1099-R are not retirement or pension benefits. Under Michigan law, deferred compensation is taxable. These distributions include:

All distributions from 457 plans
Distributions from 401(k) or 403(b) plans sourced to employee contributions and the earnings from those contributions if they were not matched by the employer.
Early distributions under the terms of the retirement plan are always taxable regardless of the date of birth of the taxpayer. (See retirement code chart for 1099-R below.)

NOTE: When considering your pension subtraction, ‘surviving spouse’ means the deceased spouse died prior to the current tax year (e.g., when filing a 2021 return the spouse died in 2020). Deceased spouse benefits do not include benefits from a spouse who died in 2021. If you or your spouse received pension benefits from a deceased spouse, see Form 4884, Michigan Pension Schedule instructions.

Form 1099-R Distribution Codes

Qualification for a subtraction is a two-step process. Use the distribution chart to determine whether your retirement and/or pension benefits qualify as a subtraction (step one). Then use the appropriate age category (step two). You must meet both qualification requirements in order to be eligible for a retirement and/or pension benefits subtraction.

If you do not qualify based on the distribution chart in step one, then you do not have a qualified subtraction and step two is not applicable.

Form 1099-R reports the total retirement and pension benefits you received during the year. Please refer to box 7 on Form(s) 1099-R for the distribution code(s) that describes the condition under which the retirement or pension benefit was paid. This chart lists distribution codes and describes eligibility of benefits for subtraction based on each code. Some exceptions exist. If your distribution code is not included in the list below or if you have questions on eligibility of your benefits, please consult your tax professional.

Form 1099-R Distribution Codes
Form 1099-R Distribution Codes	Does the code indicate the distribution is eligible for a Michigan retirement and pension subtraction? (Limited based on age and year of birth)
1 – Early distribution, no known exception.	No.
2 – Early distribution, exception applies.	No, unless: Part of a series of mainly equal periodic payments made for the life of the employee or the joint lives of the employee and their 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. 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. The exchange of life insurance	No.
7 – Normal distribution. 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, distribution from a life insurance, annuity, or endowment contract must be 65 and part of a series of mainly equal periodic payments made for the life of the employee or the joint lives of the employee and their beneficiary.	Yes. Exception: You may not subtract distributions from a plan that: allows the employee to set the amount of compensation to be deferred does not prescribe the retirement age or years of service
8 – Excess contribution plus earnings/excess deferrals (and/or earnings) taxable in 2021.	No.
9 – Cost of current life insurance protection.	No.

For joint filers, the age of the oldest spouse determines the age category.

Recipients born before 1946:

For 2021 you may subtract all qualifying retirement and pension benefits received from public sources, and may subtract private retirement and pension benefits up to $54,404 if single or married filing separately or up to $108,808 if married filing jointly. Private subtraction limits must be reduced by public benefits subtracted. Withholding will only be necessary on taxable pension payments (private pension payments) that exceed the pension limits stated above for recipient born before 1946.

Complete Form 4884, Michigan Pension Schedule.
Military pensions, Michigan National Guard pensions and Railroad Retirement benefits are entered on Schedule 1, line 11. These continue to be exempt from tax. They must be reported on Schedule W Table 2, even if no Michigan tax was withheld.
Social Security benefits included in your adjusted gross income are entered on Schedule 1, line 14 and are exempt from tax.
Public pensions can include benefits received from the federal civil service, State of Michigan public retirement systems and political subdivisions of Michigan.
Rollovers not included in the Federal Adjusted Gross Income (AGI) will not be taxed in Michigan.
Subtraction for dividends, interest, and capital gains is limited to $12,127 for single filers and $24,254 for joint filers, less any subtractions for retirement benefits including US military, Michigan National Guard, and railroad retirement benefits.

Recipients born during the period January 1, 1946 through December 31, 1952:

If the older of you or your spouse (if married filing jointly) was born during the period January 1, 1946 through December 31, 1952, and reached the age of 67, you are eligible for a deduction against all income and will no longer deduct retirement and pension benefits. Complete Schedule 1, line 23 instead of Michigan Pension Schedule, Form 4884.

The deduction is $20,000 for a return filed as single or married, filing separately, or $40,000 for a return filed as married, filing jointly. If you checked either SSA Exempt box 22C or 22G from Schedule 1, your deduction is increased by $15,000. If you checked both boxes 22C and 22G your deduction is increased by $30,000.

The standard deduction is reduced by military pay (included on Schedule 1, line 14), military and/or railroad retirement benefits (both reported on Schedule 1, line 11)

A surviving spouse who meets all of the following conditions may elect to take the larger of the retirement and pension benefits deduction based on the deceased spouse’s year of birth (deceased spouse must be the older of the two) subject to the limits available for a single filer or the survivor’s Michigan Standard Deduction:

Reached the age of 67 and
Not remarried and
Claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died.

Recipients born after 1952:

All retirement (private and public) and pension benefits are taxable to Michigan, unless one of following applies:

Taxpayers born January 1, 1953 through January 1, 1955 should not file Form 4884. Instead, taxpayers may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line.

To ensure you receive your maximum deduction complete Worksheet 2 in the MI-1040 booklet for Tier 3 Michigan Standard Deduction on Schedule 1, line 24.

A surviving spouse who meets all of the following conditions may elect to the take the larger of the retirement and pension benefits deduction based on the deceased spouse’s year of birth (deceased spouse must be the older of the two) subject to the limits available for a single filer or the survivor’s Michigan Standard Deduction:

Reached the age of 67 and
Not remarried and
Claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died.

The older of you or your spouse (if married filing jointly) was born after January 1, 1955 but before January 2, 1960, has reached age 62 and received retirement benefits from employment exempt from Social Security. You may be eligible for a retirement and pension subtraction of $15,000. If both spouses on a joint return qualify, the maximum subtraction increases to $30,000.
The older of you or your spouse (if married filing jointly) was born after January 1, 1955, received retirement benefits from employment exempt from Social Security, and were retired as of January 1, 2013. You may subtract up to $35,000 in qualifying retirement and pension benefits if single or married filing separately or $55,000 if married filing a joint return. If both spouses on a joint return qualify, the maximum subtraction increases to $70,000.

Nontaxable benefits:

Military pensions, Michigan National Guard pensions and Railroad Retirement benefits are entered on Schedule 1, line 11. These continue to be exempt from tax. They must be reported on Schedule W Table 2, even if no Michigan tax was withheld.
Social Security benefits included in your adjusted gross income are entered on Schedule 1, line 14 and are exempt from tax.
Rollovers not included in the Federal Adjusted Gross Income (AGI) will not be taxed in Michigan.

Surviving Spouse:

If a surviving spouse claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died and the surviving spouse has not remarried, then the surviving spouse may claim the retirement and pension benefits subtraction that would have applied based on the year of birth of the older of the surviving spouse or the deceased spouse. For more information, see instructions.

2021 Pension Deduction Estimator

DISCLAIMER:
This estimator provides an unofficial estimate and has no legal bearing on any future tax liability. Interactive estimators are made available to you as self-help tools for your independent use.

NOTE: The information you provide is anonymous and will only be used for purposes of this estimation. It will not be shared, stored or used in any other way, nor can it be used to identify the individual who enters it. It will be discarded when you exit this program.

Dividends/Interest/Capital Gain Deduction

Senior Citizens born before 1946 (or the unremarried surviving spouse for someone born before 1946 who was at least age 65 at the time of death) may subtract dividends, interest, and capital gains. The subtraction is limited to $12,127 for single filers and to $24,254 for joint filers for 2021. These limits must be reduced by any pension subtraction taken.

Michigan Lowers 2023 Tax Rate (3 Things To Know)

On July 4, 2023 / Michigan Taxes

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Michigan Taxes – Michigan Lowers 2023 Tax Rate

Michigan resident? Need tax help? Contact ATS

LANSING, Mich. — Following the release of the State’s fiscal year 2022 Annual Comprehensive Financial Report, Treasurer Rachael Eubanks announced that Michigan’s state income tax will decrease to 4.05% for one year. Driven by low unemployment, strong business growth, and an overall strong economy, families will pay lower taxes when they file next year for tax year 2023.

“Michigan’s strong economic position has led to a reduction in the state income tax from 4.25% to 4.05% for 2023,” said Treasurer Rachael Eubanks. “When Michiganders file their 2023 state income taxes in 2024, they will see the rate adjustment in the form of less tax owed or a larger refund.”

“As a result of our growing economy and strong fiscal management, Michigan’s state income tax will decrease to its lowest in 15 years,” said Governor Whitmer. “Our state is headed in the right direction, bolstered by low unemployment, projects bringing jobs and supply chains home, and fiscally responsible, bipartisan leadership that took us from a projected $3.5 billion deficit in 2020 to a $9.2 billion surplus this year, paid down $14 billion in debt, and brought the rainy-day fund to an all-time high. This year, we permanently rolled back the retirement tax on our seniors, quintupled the Working Families Tax Credit for 700,000 families, and now, everyone’s income tax will decrease for a year. In total, we have put $1.6 billion in tax relief back in people’s pockets without cutting any critical services or programs.”

State Income Tax Reduction

In 2015, Michigan enacted a law requiring a temporary reduction of the state income tax if the general fund grew faster than the rate of inflation in any year starting in 2023. Now, because of strong economic growth and robust state revenues, the state income tax will decrease to 4.05% for one year. This will equate to a savings of approximately $50 for the average Michigan taxpayer.

Attorney General Dana Nessel issued a legal opinion finding that the tax reduction will apply to tax year 2023. It requires consensus by and annual reevaluation by the Treasurer, Senate Fiscal Agency, and House Fiscal Agency. It is anticipated the formal step of adopting a consensus with updated revenue estimates will occur as a procedural matter at the May Consensus Revenue Estimating Conference. The tax change will be effective Jan. 1, 2023 for tax year 2023.

Governor Whitmer’s Fiscally Responsible Leadership

Since taking office, Governor Whitmer has signed four balanced, bipartisan budgets paying down $14 billion in debt, and brought the rainy-day fund to an all-time high of nearly $2 billion without raising taxes on working families by a dime. She signed legislation cutting taxes for small business owners, permanently rolling back the retirement tax on seniors, permanently quintupling the Working Families Tax Credit, and established bipartisan economic development tools to help the state land over $16 billion of projects creating 16,000 domestic manufacturing jobs. Thanks to this governor’s strong, fiscally responsible leadership, Michigan received its first credit rating upgrade in a decade from Fitch, a national financial firm.

Michigan Residential Solar Tax Credits

On June 29, 2023 / Michigan Taxes

4.3/5 - (3 votes)

Go solar with Michigan Residential Solar Tax Credits incentives and rebates.

Michigan resident and have tax questions regarding solar? Contact ATS Advisors!

Whether you live in Detroit or out in green Ann Arbor, the Great Lake State has a wealth of sunshine and plenty of solar incentives to offer homeowners. Learn more about the many programs, rebates and incentives in Michigan and find out why so many of your neighbors are putting solar panels on their roofs.

The best way to compare your solar options and save money at the same time is by registering on the EnergySage Marketplace. When you compare quotes for solar panels on EnergySage’s competitive solar marketplace, you can expect to see prices up to 20% lower than working with a single solar company. Read our updated article on the cost of solar panels to compare solar costs across states and by panel brand.

Awesome solar programs in Michigan

Michigan Saves Home Energy Loan Program

This MI financing option offers homeowners the chance to upgrade their home’s energy efficiency with loans that have APR’s as low as 4.99% depending on credit score. The loan timeline ranges from 12 months to 10 years with a maximum APR set at 7.90%, making this program a great way to buy your solar system by making easy affordable payments.

Michigan solar tax credits and incentive programs

The federal solar tax credit

Don’t forget about federal solar incentives! With the investment tax credit (ITC), now referred to as the Residential Clean Energy Credit for residential systems, you can reduce the cost of your PV solar energy system by 30 percent. Keep in mind that the ITC applies only to those who buy their PV system outright (either with a cash purchase or a solar loan), and that you must have enough income for the tax credit to be meaningful (unless you’re a tax-exempt entity, in which case you might be eligible for a direct payment).

Michigan Residential Solar Tax Credits

AC Tax Credit 2023

On June 14, 2023 / Michigan Taxes

5/5 - (1 vote)

Is there an Air Conditioner Tax Credit for 2023?

Yes. Homeowners can benefit from up to a $600 AC Tax Credit 2023 towards a new AC due to the Federal Inflation Reduction Act.

Talk to our team of friendly tax pros: Contact ATS

On January 1, 2023, new federal tax credits came into effect under the provisions set forth in the Inflation Reduction Act. These tax credits cover a wide range of home energy efficiency improvements, including equipment like air conditioners, heat pumps, and heat pump water heaters, as well as upgrades to the home envelope like doors, windows, insulation, etc.

These new tax credits will replace the Non-Business Energy Property Tax Credits, which were also extended under the IRA through December 31, 2022. You can find information about the tax credits for air conditioners and heat pumps purchased in 2022 or earlier here.

Federal Tax Credit Overview

Annual Limits: 30% of the project cost up to a $3,200 annual maximum for all energy efficiency improvements claimed under this credit, subject to aggregate limits. This breaks down to:

Up to $2,000 annual limit toward the purchase of any combination of air source heat pumps, heat pump water heaters, and biomass stoves/boilers.
Up to $1,200 annual limit toward the purchase of any combination of central air conditioners, furnaces, boilers, plus other home envelope improvements (e.g. windows/doors/skylights, insulation, electrical).
There are per-project limitations as well. Below, we will detail the tax credits available for air conditioners and heat pumps. For further details about tax credits for other types of energy efficient home improvements, visit energystar.gov.

Dates: Equipment must be purchased and installed January 1, 2023–December 31, 2032.

Property Requirements: Equipment must be installed in an existing home and your principal residence (the place you occupy most of the time). New construction and rentals do not apply. The principal residence must be in the United States and may be a house, houseboat, mobile home, cooperative apartment, condominium, or a manufactured home to qualify.

Pro Tip: To make the most of the tax credits, spread your energy efficiency improvements over a few years. The $3,200 annual limit and any aggregate limits reset each year through 2032. You can find ways to mix and match the tax credits for maximum savings by looking at your options on the ENERGY STAR website. Also, please be sure to consult your accountant or tax professional.

Air Conditioner and Heat Pump Tax Credit Details

Please consult your accountant or another tax professional to ensure that you meet all the requirements necessary to receive tax credits for your air conditioner or heat pump upgrade. Additionally, you can ask your local HVAC contractor for details about your equipment to verify its eligibility.

Central Air Conditioners:

You can claim 30% of the project cost, up to a $600 maximum credit.
The air conditioner must meet the following efficiency requirements:
- Split Systems: ENERGY STAR certified* equipment with SEER2 ≥ 16
- Packaged Systems: All ENERGY STAR certified systems are eligible.

Air Source Heat Pumps:

You can claim 30% of the project cost, up to a $2,000 maximum credit.
The heat pump system must meet the following efficiency requirements:
- Ducted Split Systems: All systems that have earned the ENERGY STAR label are eligible.
- Ductless Mini-Split (Non-Ducted) Systems: ENERGY STAR certified equipment with SEER2 ≥ 16, EER2 ≥ 12, HSPF2 ≥9.
- Heat pump models with the ENERGY STAR Cold Climate* designation:
  - Ducted Systems: EER2 ≥ 10
  - Mini-Split Systems: SEER2 ≥ 16, EER ≥ 9, and HSPF ≥ 9.5.

About Energy Efficiency Ratings – SEER2, HSPF2, EER2

A new system for rating the energy efficiency of air conditioners and heat pumps also came into effect on January 1, 2023. SEER2 (Seasonal Energy Efficiency Ratio 2),HSPF2 (Heating Seasonal Performance Factor 2) and EER2 (Energy Efficiency Ratio 2) have replaced the previous rating system, SEER, HSPF, and EER. For more information about this change and its impacts on HVAC equipment, please refer to our blog post 2023 AC Energy Efficiency Standards: What You Need to Know.

How Do I Apply?

To claim AC Tax Credit 2023, fill out and file the appropriate form with your tax return.

Tax credits are administered by the IRS, and the credit amounts you may receive are subject to IRS regulations. Therefore, we highly recommend consulting a tax professional for advice on tax preparation and your tax credit eligibility. For more information about the tax credit, you can also visit IRS.gov.

What Other Equipment Qualifies for a Tax Credit?

Even if you don’t plan on upgrading your heating & cooling system, you might intend to purchase another qualifying household appliance like a heat pump water heater. Check the entire list of qualifying home improvements.

There are also separate tax credits available for renewable energy home improvements, like wind, solar, and geothermal. These upgrades do not count toward the $3,200 annual maximum under the energy efficiency tax credits.

The IRS also included modifications and extensions for tax credits available to home builders and commercial buildings.

DISLCAIMER: The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS).

AC Tax Credit 2023

48C Tax Credit 2023

On June 5, 2023 / IRS

4.7/5 - (3 votes)

Live in Michigan? Need Tax Help? Contact ATS Advisors

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Notice 2023-44PDF to provide more details for applicants seeking section 48C tax credit 2023 allocations in the qualifying advanced energy project credit allocation program under the Inflation Reduction Act.

On Feb. 13, 2023, the Treasury Department and the IRS issued Notice 2023-18 to establish the section 48C(e) program to allocate $10 billion in credits not less than $4 billion of which will be allocated to projects located in certain energy communities census tracts. The notice also provided initial program guidance and announced that the Treasury Department and the IRS would issue additional program guidance by May 31, 2023. The guidance is primarily of interest to owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects, and critical material projects.

Notice 2023-44 updates the earlier version of Appendix A, defining qualifying advance energy projects, with clearer definitions and examples, and updates the earlier version of Appendix B, providing the Department of Energy application process, by adding technical review criteria and application content requirements. This notice also provides the process for submitting concept papers and joint applications for DOE recommendations and for IRS § 48C(e) certifications and clarifies the selection criteria used to evaluate whether a project merits a DOE recommendation.

Additionally, Notice 2023-44 defines the term “facility” for purposes of sections 45X and 48C, provides the procedure for informing DOE and IRS of a significant change to the project plan, includes information regarding the disclosure of certain information, and clarifies that eligible property that is placed in service before being awarded an allocation of section § 48C credits is ineligible for the § 48C(e) program. Finally, the guidance provides information regarding section 48C(e) energy communities census tracts, including new Appendix CPDF, which contains a list of those census tracts.

More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

5 Michigan Tax Hacks to Save!

On May 30, 2023 / Michigan Taxes

5/5 - (2 votes)

Interested in learning more about how to save during tax season? Here are 5 Michigan Tax Hacks to Save!

Questions? Contact your trusted Michigan CPAS, ATS Advisors

During income tax filing season from January to April 15, most filers receive a refund, according to IRS statistics. The good news is there are many federal and Michigan tax credits to reduce the amount owed and generate significant tax refunds for those eligible.

Tax credits reduce taxes owed while tax deductions subtract from taxes owed. Each year, the Michigan League for Public Policy publishes Money Back in Michigan, which explains credits in easy-to-read fact sheets. Review these ways to save when it comes to filing your taxes.

1.) If you contributed up to $2,000 in your retirement plan or IRA, you could qualify a Saver’s Credit. Plan ahead by including regular deposits to your retirement accounts, with the amounts depending on your Adjusted Gross Income (AGI). Check with the IRS for current dollar amounts of what you can contribute to 401(k), 403(b) and most government plans.

2.) Earned Income Tax Credit (EITC) provides tax breaks for low and moderate income working families and individuals. Michigan also has its own EITC that you can take advantage of.

3.) Homestead Property Tax Credit in Michigan is a refundable credit for eligible Michigan residents who pay high taxes or rent in relation to their income.

As a side note, several homeowners contacted our office recently struggling to pay their property taxes. We discovered they were not receiving the Homestead Exemption to lower their local property taxes about 40 percent, even though the home was their primary residence. We advised them to go to their county Assessor’s Office with proof they lived in the home (for example, a utility bill) to file the paperwork asking for up to a three-year credit.

4.) More federal tax credits and deductions that may apply to you are the Federal Child Tax, Child and Dependent Care, and the American Opportunity Tax Credit for College Education. In Michigan, you may be eligible for a Home Heating Credit. These are the most commonly used tax credits you might qualify for when filing your 2016 income taxes.

5.) More saving tips during tax season?

Do not pay to have your taxes done. Find out where you can go for free tax help by visiting www.michiganfreetaxhelp.org or calling 2-1-1.
Do not pay for “rapid refunds”. Keep all your refund money, and do not fall for advertisements claiming your refund may be delayed for weeks or months.
File early. The IRS is encouraging all filers to submit their returns early because of tax fraud and identity theft cases.

Take time to understand your tax credits for filing your income tax return. By taking advantage of the available Michigan Tax Hacks and deductions, you can start off the New Year on the right path to meeting your financial goals. Also check out the tax time saving tips from the Consumer Financial Protection Bureau.

Michigan Tax Overages

On May 23, 2023 / Uncategorized

4.2/5 - (8 votes)

Have a question about Michigan Tax Overages? Contact your trusted Michigan CPA, ATS Advisors.

What are Tax Overages?

Tax “Overages” refers to the extra money that is left over when a foreclosed property is sold at a tax sale auction for more than the amount of back taxes owed on the property. Unlike mortgage auctions, the opening bid at a tax auction is usually the amount of unpaid taxes due on the property. (plus penalties, interest, and any associated costs for putting on the auction). If a property sells for more than the opening bid, then overages (surplus funds) will be generated. However, what most homeowners do not know is that many states do not allow counties to keep this extra money for themselves. Some state statutes dictate that excess funds can be claimed by a few parties – including the person who owed taxes on the property at the time of the sale.

Michigan Tax Overages?

On July 17, 2020, the Michigan Supreme Court issued an unanimous[1] decision, finding that the retention of surplus proceeds from a tax-foreclosure sale under the General Property Tax Act (“GPTA”) is an unconstitutional taking without just compensation under Article 10, § 2 of Michigan’s Constitution of 1963. Before the decision by the Court, Michigan was among a minority of states who permitted the retention of surplus proceeds from tax-foreclosure sales. Property owners that have lost their property as a result of a tax foreclosure sale now have a claim against the county for the difference between the amount of taxes owed and the amount realized at the tax sale by the County.

Whats Next?

Michigan.gov states: Beginning with the 2021 foreclosure auctions, those who hold interest in property at the time of foreclosure, may file to claim leftover proceeds for parcels which sell for more than the owing delinquency. Further details are available on Michigans Auctions and Claimants webpage.

Michigan Nexus Rules

On May 16, 2023 / Michigan Taxes

4.7/5 - (7 votes)

Wondering about the Michigan Nexus Rules? Here are the 3 Michigan Nexus Rules to read and understand!

Have a Michigan Tax Question? Call ATS Advisors, your trusted Michigan CPA!

Michigan Nexus

A person has nexus with Michigan if the person

1) Is physically present in the state for more than one day.

2) Actively solicits sales in Michigan and has gross receipts of $350,000 or more sourced to Michigan, or

3) Has an ownership or beneficial interest in a flow-through entity (directly or indirectly through 1 or more flow-through entities) which has substantial nexus in this state.

“Actively solicits” means 1) speech, conduct, or activity that is purposefully directed at or intended to reach persons within this state and that explicitly or implicitly invites an order for a purchase, or 2) speech, conduct, or activity that is purposefully directed at or intended to reach persons within this state that neither explicitly nor implicitly invites an order for a purchase or sale, but is entirely ancillary to requests for an order for a purchase or sale.

“Gross receipts” is the entire amount received by the taxpayer, determined using the taxpayer’s federal method of accounting, less certain exclusions. Gross receipts includes amounts attributable to an ownership interest in a flow-through entity.

A “flow-through entity” is a subchapter S corporation, general partnership, trust, limited partnership, limited liability partnership or a limited liability company which is not taxed as a corporation at the federal level for the tax year.

Michigan Small Business Alternative Credit

On May 8, 2023 / Uncategorized

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How is the Michigan Small Business Alternative Credit under MCL 206.671 calculated by a taxpayer that is a unitary business group? How do the disqualifiers and percentage reducers work?

Michigan Resident and Need Help? Contact ATS Advisors!

The Michigan Small Business Alternative Credit is available to any taxpayer (other than insurance companies under Chapter 12 and financial institutions under Chapter 13) with gross receipts that do not exceed $20,000,000.00 and with adjusted business income minus the loss adjustment that does not exceed $1,300,000.00 as adjusted annually for inflation using the Detroit consumer price index and subject to certain additional disqualifiers. MCL 206.671(1). The taxpayer will also be disqualified if an officer or shareholder receives more than $180,000.00 in compensation or compensation plus share of business income exceeds that amount (allocated income disqualifier). MCL 206.671(1)(a).

“Taxpayer” is defined to include a unitary business group. MCL 206.611(5). The gross receipts and adjusted business income thresholds are those of the unitary business group (UBG) and are calculated at the group level. The allocated income disqualifier is calculated for an officer or shareholder using all amounts paid or allocable to the officer or shareholder by all entity members of the unitary business group. MCL 206.671(2)(B). The reduction percentages of the credit, which may reduce but not completely disqualify a taxpayer from the credit, are calculated in the same manner.

A disqualifier or reduction percentage applies to the entire UBG if such applies to any one member of the group. MCL 206.671(9). This credit is calculated without regard to intercompany eliminations.

Example X, a taxpayer that is a unitary business group is disqualified from taking the credit if that unitary business group includes a member that is an LLC taxed as a corporation and any one shareholder or any one member of the LLC receives more than $180,000.00 in shareholder compensation. The shareholder’s compensation is calculated by combining all compensation paid to the shareholder by all members of the UBG.

Example Y, the credit is reduced by 20% if the taxpayer is a unitary business group that includes a member that is a corporation and the compensation and director’s fees of an officer of that member corporation exceed $160,000.00 but are less than $165,000.00, calculated with compensation and director’s fees paid by all members of the group.

Michigan Small Business Alternative Credit – michigan.gov

Michigan Solar Tax Credit 2022

On May 1, 2023 / Uncategorized

4/5 - (1 vote)

Live in Michigan? Have any Solar Tax Questions? Contact ATS Advisors today

Michigan is a state where having alternative energy sources could save you a great deal of money. With warm summers and cold winters, ensuring you have a solar panel system could help to save thousands of dollars a year. The key is finding a system that you can afford and will continue to lower your electricity rate through the years. In our guide providing the best Michigan solar incentives, we provide:

Why solar installations make sense
Rebates to help you save money on your solar energy system
Tax incentives that can help make a solar system possible

Although this is true, the question still remains: Is there a Michigan Solar Tax Credit 2022 ?

Michigan has no state-specific tax rebate program, there are local incentives for solar projects and the federal programs that help to keep down the cost of solar panels.

The Best Solar Incentives, Tax Credits, and Rebates in Michigan

The best solar incentive in Michigan is the Federal Solar Investment Tax Credit (ITC). This program is a great way to help homeowners keep energy costs down and get a sizable tax return the year they put their system in place.

Incentive	Summary	End Date
Federal Solar Tax Credit (ITC)	Michigan residents can take advantage of the Federal Solar Tax Credit and get a discount of 30% applied to their tax returns. If you purchase $20,000 worth of solar panels, you can get a credit of $6,000 on your next tax return. Remember, this does require you to come out of pocket first. Read More	December 31st, 2032
Net Metering	Net metering allows homeowners that create excess energy to use it as a credit on their next electric bill. Although net metering is not mandatory in Michigan, many providers take advantage of it and offer fair rates.	None
Commercial Loan Programs	For government and commercial solar installations in Michigan, there are various programs to help improve overall rates and availability of funds. Some of these can help with loans up to $100,000.	None
Residential Loan Programs	The Michigan Saves loan program will help homeowners secure financing ranging from $1,000 to $50,000 for their home energy upgrades and installations. The term of this financing can extend as long as ten years.	None
Michigan Residential Property Tax Exemption	Property taxes go up when a solar system is installed. With the Michigan Residential Property Tax Exemption, the costs are kept down, and you can upgrade your home without the financial burden of taxes increasing. Read More	None

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax credit is available in all 50 states, Michigan included. This program will give you a discount on your next federal tax return based on your home solar installation cost. This program was recently extended through the end of 2032 as a part of the Inflation Reduction Act.

The ITC allows you a tax credit of 30% of the cost of your solar installation. The solar system will need to be paid out of pocket and in full, with credit being returned and filed against any taxes you owe for that year. If you do not owe taxes the year that you installed your solar energy system, you can simply have this credit follow you until you need it.

Michigan Solar Energy Tax Credit

Michigan does not have a solar energy tax credit or rebate. Some states have an additional savings program that can be very beneficial and help to save additional money, but Michigan only allows for federal savings in this category. As we have mentioned, these programs can be adopted at any time, so it’s worth checking how they change through the years.

Michigan Solar Sales Tax Exemption

There is no tax credit for a residential solar system purchase in Michigan. You will still be subject to the 6% sales tax for your new solar power system purchases.

Michigan Solar Property Tax Exemption

Property taxes will increase with the installation of a solar system in Michigan. Luckily, a program will make your property taxes stay the same even after your solar installation. The solar property tax exemption ensures that even with this $20,000 or more upgrade to your home, your assessed value does not change, and taxes should remain level.

Michigan Net Metering

Michigan net metering creates more energy than your home needs and supplies some of that energy back to the utility company or reserves it when you need it the most. Most homeowners find that their solar system does not create enough energy on cloudy days or at night. Therefore you can bank some energy with the local utility company and have it offset your total costs.

The net metering program in Michigan is pretty good. The state does not mandate a certain amount of payment per kilowatt hour, and they don’t even require companies to offer net metering. However, some good programs with companies like DTE energy and others will help lower your total electric cost obligation at the end of every month.

Michigan Saves – Home Energy Loan Program

The Michigan Saves Home Energy Loan Program will help homeowners secure financing for energy improvements to their homes. The size of the loans this program offers range from $1,000 to $50,000, and they have low rates to help save money on interest.

Loan terms on these loans can be as long as ten years.

Lansing Board of Water & Light – Residential Energy Efficiency Rebates

In the city of Lansing, there are additional rebates for homeowners that make their homes more energy efficient. These rebates will vary depending on the type of system you are installing and the size.

The rebate is currently $500 per kW with a max of 4kW. Adding this in addition to the federal tax rebate and a Michigan Saves Home Energy Loan Program, can result in quite a bit of saving.

Commercial Michigan Solar Incentives

The commercial Michigan solar incentives are strong and will allow for a few extra benefits and loan programs that the residential programs do not offer. If a solar panel system could help your company or business with its green initiatives, Michigan is an excellent place to be.

Solar Incentives for Nonprofits and Businesses in Michigan

There are no specific solar incentives for nonprofit organizations in the state of Michigan. However, there are tax relief programs for nonprofits and loan funding programs that will apply to nonprofits and businesses.

USDA REAP Grant

The United States Department of Agriculture offers a REAP grant or Rural Energy for America program. This is in place to help agricultural producers secure renewable energy resources loans. The USDA will help ensure loan financing and grant funding for agricultural producers, making the process straightforward. Simply input your information, and they will be in touch about ways that you can save. Make sure you connect with the USDA at the beginning of your search for solar power, as they can offer tremendous guidance.

Federal Solar Tax Credit for Businesses in Michigan

For a federal corporate income tax return, there is a 30% credit against the cost of any system that was placed into the building during that year. This credit is the best option when looking for large bulk savings in the state of Michigan. Most businesses have a tax burden at the end of the year, and this can help offset that considerably.

The Federal Solar Tax Credit is still one of the best ways to save money on solar energy, and is in place through the end of 2032.

Michigan Commercial Net Metering

Net metering is also available at the commercial level for Michigan businesses and property owners. Net metering for commercial and governmental institutions not only helps with energy efficiency but can also make the building more sustainable and profitable long term.

The state of Michigan does not mandate commercial net metering. However, in the commercial and business sector, there are plenty of programs in place from large energy providers that want to ensure that this solar-created electricity is used properly to power as much of the grid as possible. The solar arrays put in place by commercial and business operations can create large amounts of energy.

Refundable Payroll Tax Credit

The refundable payroll tax credit is for businesses that meet specific requirements for alternative energy. Payroll taxes can be considerably reduced for businesses that take these green energy initiatives, saving thousands of dollars annually.

With this refundable payroll tax credit, you will multiply the payroll amount attributable to qualified employees by the income tax rate for that year. A qualified accountant can help with these programs, but it takes time and attention to detail to set this up.

City of Ann Arbor – Green Power Purchasing

The City of Ann Arbor Green Power Purchasing is designed to help local governments with their out-of-pocket expenses on solar initiatives. This program aims to reduce greenhouse gasses and increase the amount of solar and wind power in the city yearly.

To encourage this, the City of Ann Arbor has incentives and programs that help make this more appealing to businesses and government institutions. The four goals of this program include supporting onsite renewables and battery storage, developing more community solar programs, and launching solar landfill projects.

Michigan Saves – Commercial Energy Loan Program

The Michigan Saves Commercial Energy Loan Program can make it easier to afford a solar panel system for a business or commercial property. It’s smart to compare these loans from the PACE program and other sources to determine the best rate and the best term.

The Michigan Saves program offers considerably higher amounts of funding for businesses than they do for residential installations.

Michigan Local PACE Program

The PACE program allows property owners in the commercial or industrial sector to get financing for energy-efficient improvements to their property. The PACE program requires a $10,000 initial investment into energy-saving improvements.

PACE financing must be in place before starting your commercial solar project to ensure you get the best possible financing.

Why Go Solar in Michigan?

Michigan currently ranks 24th in the nation according to SEIA for being solar-friendly. The cost of installing solar options in Michigan has dropped through the years. Local governments have adopted home energy-saving programs to make it more affordable for homeowners that want to become greener. However, there is still no state savings program, which puts Michigan slightly behind.

A PV or Photovoltaic system will help make you less reliant on Michigan power providers and more self-sufficient. Most home solar systems do not produce enough electricity to power your home and electric vehicle completely, so some programs allow you to continue to move away from the grid and have a more evenly distributed generation of electricity in your home.

As great as it is to be dealing with creating your electricity and saving money, many Michigan homeowners want the system to help with environmental issues. Using a natural resource like wind, sun, or water to generate electricity will help the environment.

Sold on Solar for your home? Get a free quote from local solar installers.

Michigan Solar Tax Credit 2022 – Todays Homeowner.com