25 Michigan Small Business Tax Write-Offs

Here are 25 Michigan Small Business Tax Write-Offs that you can use to save money this upcoming tax season. These top tax write-offs will help speed up the income tax filing process and reduce the amount you owe to the government in taxes.

Questions? Contact ATS Advisors today!

1. Business Meals

As a small business, you can deduct 50 percent of food and drink purchases that qualify. To qualify, the meal needs to be related to your business and you need to keep the following documentation related to the meal:

  • Date and location of the meal
  • Business relationship of the person or people you dined with
  • The total cost of the meal

The easiest way to track business meal expenses is to keep your receipt and jot down notes on the back about the details of the meal.

2. Work-Related Travel Expenses

All expenses related to business travel can be written off at tax time, including airfare, hotels, rental car expenses, tips, dry cleaning, meals and more. You can reference the IRS website for a full list of deductible business travel expenses. To qualify as work-related travel, your trip must meet the following conditions:

  • The trip must be necessary to your business.
  • The trip must take you away from your tax home, i.e. the city or area in which your company conducts its business.
  • You must be travelling away from your tax home for longer than a normal work day and it must require you to sleep or rest on route.

3. Work-Related Car Use

If you use your car strictly for work-related purposes, you can write off all costs associated with operating and maintaining it. If your car use is mixed between business and personal reasons, you can only deduct costs that are related to the business usage of the vehicle. You can claim the mileage you use for business driving, either by deducting the actual miles traveled for business, or by using the standard mileage deduction of $0.56 per mile driven.

4. Business Insurance

You can deduct the cost of your business insurance on your tax return. If you have a home office, or use a portion of your home to run your business, you can deduct your renter’s insurance costs as part of your home office write-offs.

5. Home Office Expenses

Under new simplified IRS guidelines for home office expenses, home-based small businesses and freelancers can deduct five dollars per square foot of your home that’s used for business purposes, up to a maximum of 300 square feet. To qualify as a tax deduction, your work area has to be used exclusively for business (i.e. you can’t write off the square footage of your dining room if you do your work at the table during the day) and you need to use the home office regularly as your principal place for conducting business.

6. Office Supplies

You can write off office supplies including printers, paper, pens, computers and work-related software, as long as you use them for business purposes within the year in which they were purchased. You can also deduct work-related postage and shipping costs. Be sure to file all receipts for office supply purchases, for documentation.

7. Phone and Internet Expenses

If using the phone and internet is vital to running your business, you can deduct these expenses. If, however, you use the phone and internet for a mix of work and personal reasons, you can only write off the percentage of their cost that goes toward your business use. For example, if roughly half of your internet usage is business related, you can write off 50% of your internet expenses for the year.

8. Business Interest and Bank Fees

If you borrow money to fund your business activities, the bank will charge you interest on the loan. Come tax season, you can deduct the interest charged both on business loans and business credit cards. You can also write off any fees and additional charges on your business bank account and credit card, such as monthly service fees and any annual credit card fees.

9. Depreciation

When you deduct depreciation, you’re writing off the cost of a big-ticket item like a car or machinery over the useful lifetime of that item, rather than deducting it all in one go for a single tax year. Businesses usually deduct depreciation for long-term business investments that are more costly, so they’re reimbursed for the expense over the entire useful lifetime of the item. Here’s how to calculate depreciation:

Depreciation = Total cost of the asset / Useful lifetime of the asset

10. Professional Service Fees

Any professional service fees that are necessary to the functioning of your business, such as legal, accounting and bookkeeping services, are deductible for tax purposes. If you use accounting or bookkeeping software for your business, that would also qualify as a tax deduction. If you are having trouble determining whether a particular professional service expense is for work or personal use, these guidelines for legal and professional fees from the IRS can help you judge the nature of the expense.

11. Salaries and Benefits

If you’re a small business owner with employees, you can write off their salaries, benefits and even vacation pay on your tax returns. There are a few requirements for writing off salary and benefit expenses:

  • The employee is not a sole proprietor, partner or LLC member in the business
  • The salary is reasonable and necessary
  • The services delegated to the employee were provided

12. Charitable Contributions

You can deduct charitable donations that you make to qualifying organizations. If your business is set up as a sole proprietorship, LLC or partnership, you can claim these expenses on your personal tax forms. If your company is a corporation, you claim charitable donations on your corporate tax return.

13. Education

Any educational expenses you incur to bring value to your business are fully deductible for tax purposes. The requirements for education-related expenses are that the course or workshop must improve your skills or help maintain your professional expertise. Educational expenses that qualify for deductions include:

  • Courses and classes related to your field of work
  • Seminars and webinars
  • Trade publication subscriptions
  • Books related to your industry

14. Child and Dependent Care

Costs you incur for caring for children or adult dependents is tax deductible. If your own children are twelve years old or younger, you can write off costs associated with their care. Adult dependents also qualify for deductions, including spouses and some other related adults who are unable to care for themselves because of physical or mental disability.

15. Energy Efficiency Expenses

Upgrades that you make to your home to ensure it’s more energy efficient can qualify for tax credits. You can claim 30 percent of the cost of alternative energy equipment for your home, including solar panels, solar water heaters and wind turbines. The IRS site offers further details on the home energy tax credits.

16. Investments

If you borrow money in order to make investments, you can write off the interest paid on the loan. You can deduct the interest up to the point that it matches what you earned in investment income.

17. Foreign-Earned Income Exclusion

American citizens with businesses based abroad can, under certain circumstances, leave the foreign income they’ve earned off their tax return. To qualify for the exclusion, your tax home must be based abroad. This article can help you better understand the requirements for foreign-earned income exclusion.

18. Medical Expenses

You can claim both insurance premiums and medical care expenses, including doctor’s fees, prescription drugs and home care. If you’re self-employed and pay for your own health insurance then you can deduct your health and dental care insurance premiums.

19. Real Estate Taxes

Real estate taxes paid at the state and local levels can be deducted on your income taxes. Property taxes are included in these deductions and you can claim up to a total of $10,000.

20. Mortgage Interest

You can deduct interest payments made toward mortgage loans to buy, construct or improve your home if you use your home for business purposes. If you take out loans against your home equity, you can also deduct the interest on those loans.

21. Moving Expenses

If you move and the main reason for doing so is work related, you might be able to fully deduct the costs associated with the move. To qualify, your move has to pass the distance test. To pass the distance test your new job location has to be at least 50 miles farther from your former home than your old job location was from your previous home.

22. Retirement Contributions

If you contribute to an Individual Retirement Account, doing so helps reduce your taxable income for the year. Your total IRA contributions can’t exceed the total income you earned that year or it can’t exceed the annual maximum contribution, whichever one is less.

23. Advertising and Promotion

You can fully deduct expenses related to promoting your business, including digital and print advertising, website design and maintenance and the cost of printing business cards.

24. Client and Employee Entertainment

If you take business clients out, you can deduct the expense as long as you discuss business during the meeting and the entertainment takes place in a business setting for business purposes. You can deduct 50 percent of the cost of these entertainment expenses. You can also deduct as much as 100 percent of the cost of social events held for your employees.

25. Startup Expenses

If you launched a new business venture in the latest tax year, you can deduct as much as $5,000 in startup expenses you incurred in the lead up to your business launch. That can include costs associated with marketing your new business, travel and training costs.

How Do Business Tax Deductions Work?

Business tax deductions work by lowering your taxable income, thereby lowering the amount of tax you owe to the government as part of your tax return. To find out how to claim the most deductions possible, it’s a good idea to consult a professional, like a CPA. It’s the job of an accountant to know what tax deductions are available and how they can apply to your small business.

What Can Be Written off as Business Expenses?

Small businesses, freelancers and entrepreneurs can write off a range of business expenses when filing their income tax, including:

  • Car expenses and mileage
  • Office expenses, including rent, utilities, etc.
  • Office supplies, including computers, software, etc.
  • Health insurance premiums
  • Business phone bills
  • Continuing education courses
  • Parking for business-related trips
  • Business-related travel expenses, including flights, rental cars, hotels, etc.
  • Postage

What Is a 100 Percent Tax Deduction?

A 100 percent tax deduction is a business expense of which you can claim 100 percent on your income taxes. For small businesses, some of the expenses that are 100 percent deductible include the following:

  • Furniture purchased entirely for office use is 100 percent deductible in the year of purchase.
  • Office equipment, such as computers, printers and scanners are 100 percent deductible.
  • Business travel and its associated costs, like car rentals, hotels, etc. is 100 percent deductible.
  • Gifts to clients and employees are 100 percent deductible, up to $25 per person per year.
  • If you’re self-employed and pay your own health premiums, you can deduct those at 100 percent.
  • Your annual business phone bills are 100% deductible.

What Is a 1099?

A 1099 is an IRS tax form that’s used to report any income earned through sources other than employment, so independent contractors, freelancers and self-employed workers use the 1099 form. You can find out more about the 1099 tax form on the IRS site.

Can You Write off Previous Years’ Taxes?

As a small business, you may be able to write off the state and local taxes in the year you paid them, even if the taxes are from a previous year. However, you can’t deduct any federal taxes that you paid for a prior year.

 

Thank you for taking time to read our 25 Michigan Small Business Tax Write-Offs guide!

Michigan Home Heating Tax Credit

Michigan Home Heating Tax Credit

Michigan residents can apply for the Michigan Home Heating Tax Credit until Sept. 30

Tax credits are not just for tax season. The Community Economic Development Association of Michigan (CEDAM) is encouraging low- to moderate-income residents across the state to apply for the Home Heating Credit before the deadline of Sept. 30.

Each year, the Home Heating Credit is available to Michigan residents. This year there is $120 million allocated to provide qualified homeowners and renters in Michigan with heating assistance through the Home Heating Credit. This amount is significantly higher than previous years due to an additional $70 million in funding from the federal American Rescue Plan Act.

“The Michigan Department of Health and Human Services (MDHHS) wants to increase access to and usage of the Home Heating Credit program,” said MDHHS Director Elizabeth Hertel. “We are working with CEDAM to help get the word out to residents who need help keeping their heat turned on ahead of the fall and winter months.”

CEDAM was awarded a $1 million grant earlier this year to increase access to the Home Heating Credit benefit and free tax preparation services, and, in partnership with the Michigan Department of Health and Human Services, they are encouraging Michigan homeowners and renters to apply.

“Every family should be able to keep the heat on and stay warm and safe through our Michigan winters,” said Governor Gretchen Whitmer. “I am proud of the work we have done to fund and expand the Home Heating Tax Credit, and I urge families to apply by September 30 so they can be ready for the fall and winter. This credit goes directly to qualified homeowners and renters in Michigan, lowering their costs and saving them money to pay other bills and put food on the table. I will work with anyone to offer families real relief, and I am grateful to the Community Economic Development Association of Michigan for their work in getting this done.”

Last year, the average household received $216 from the Home Heating Credit benefit to reduce their residential heating costs. Additionally, recipients of food assistance benefits that have received a Home Heating Credit of greater than $20, may be eligible for an increase in their benefits.

“Eligible individuals should not wait to apply for the Home Heating Credit with the September 30 deadline approaching,” said State Treasurer Rachael Eubanks. “This important tax credit can provide some relief as we enter into the fall heating season, leaving more money available for other critical needs.”

In order to qualify, residents must be a homeowner, or a renter with a contracted lease and meet income requirements. The best way to apply for the Home Heating Credit, and a number of other tax credits available to Michigan residents, is to book an appointment at a local free tax preparation site.

“There are over 70 locations across Michigan where residents can go to meet with trained, expert tax professionals at no cost,” said Matt Hetherwick, director of individual tax programs at Accounting Aid Society. “Everyone should file a tax return, even if they are not required to, because tax credits and benefits are waiting to be claimed.”

Free tax preparation is a community service designed to help Michigan residents improve their financial wellbeing. Residents who qualify for free tax preparation include those with disabilities, those with limited English-speaking ability and those who earn less than $58,000 per year. Tax preparation providers are trained volunteers who are experts in taxes and have an accuracy rate, on average, higher than their for-profit colleagues.

If you are looking to talk with an experienced CPA about this credit, reach out to us today at: ATS ADVISORS

Michigan Student Loan Forgiveness

MICHIGAN NEWS / Aug.24.2022 / MLive

A student debt plan announced by President Joe Biden Wednesday will bring Michigan Student Loan Forgiveness for many Michigan borrowers. The Biden administration plans to forgive $10,000 per borrower and $20,000 per Pell Grant recipient who are making less than $125,000 individually or $250,000 for households. A pause on student loan repayments will also be extended “one final time” through Dec. 31. And the income-driven repayment plan is being overhauled to reduce costs for borrowers.

“Here’s what my administration is going to do to provide more breathing room for people, so they are less burdened by student debt,” Biden said during an Aug. 24 press briefing.

White House officials say 43 million Americans will be impacted with about 20 million seeing their debt erased. In Michigan, there are 1.4 million student loan borrowers holding $51.3 billion in debt, federal data shows. About 700,000 of those with federal student loans will see their debt cut in half or erased completely, according to the governor’s office. “People can use these savings to buy a home, start a business, get married, or start a family. I will work with anyone to keep lowering the cost of higher education and offering more paths for Michiganders to earn a higher education tuition-free, without going into debt in the first place,” said Gov. Gretchen Whitmer in a statement.

A two-year pause on federal student loan payments has now been extended eight times throughout the pandemic. With each deadline, Biden faced increasing pressure to take broader action to address the $1.7 trillion student debt crisis. The current payment pause was set to expire on Aug. 31. “It undoubtedly will help Michiganders who have student debt. Not only the $10,000 reduction in debt but also the deferment of payments until the end of the year,” said William Elliott, a University of Michigan professor of social work who researches college savings accounts, college debt and wealth inequality. Nearly 425,000 Michigan borrowers have less than $10,000 in debt and another 283,000 have less than $20,000, federal data shows. Cumulatively they account for half the state’s student borrowers and hold about 12% of the debt. The bulk of the debt in Michigan, about $45 billion, is carried by 50% of student borrowers. Elliott says removing the “albatross of student debt” will change how Michigan borrowers view their futures, ability to save, employment prospects and the economy. “It’s not enough for some, but it’s going to be a whole lot for others. And it will help all,” he said. “Sometimes in policy, that’s the best thing you can do in the moment.”

Nearly 8 million Americans will get automatic student debt relief, according to the White House. The U.S. Department of Education expects to launch an application in coming weeks for the remaining borrowers. Only loans taken out before June 30, 2022 are eligible for forgiveness. The announced changes to income-driven repayment plans will reduce costs for low- and middle-income borrowers. Income limits will be raised, and borrowers will be required to spend only 5% of their income on loans, down from 10%. Additionally, loan balances for those with $12,000 or less will be forgiven after 10 years instead of 20 years. And unpaid monthly interest won’t accumulate for those on an IDR plan even with a $0 payment. “I believe my plan is responsible and fair. It focuses the benefit on middle class and working families. It helps both current and future borrowers and will fix a badly broken system,” Biden said.

The plan, setting a precedent for student debt forgiveness, will likely be challenged in court. About 59% of Americans are worried student loan forgiveness will worsen inflation, a recent CNBC Momentive Poll found. Deputy director of the National Economic Council Bharat Ramamurti disputed these concerns saying the restart of payments will bring “billions of dollars a month” to the federal government. The Wharton School of the University of Pennsylvania estimated this week a $10,000 forgiveness plan with a $125,000 income limit will cost the federal government about $300 billion. Elliott believes student loan forgiveness should be the “first step and not the last step” in addressing the high cost of college.“I do think that it needs to be pressed upon (Biden) that this is not the end and there needs to be additional things done to finance education in a more equitable way that are more long-term and impactful,” he said. “We’re addressing the symptom. The symptom is because of a bad way to finance education, people have large amounts of debt.” Elliott says action can be taken by U.S. lawmakers, state governments and local municipalities to lower the cost of college including public service forgiveness programs and children’s saving accounts.

Where’s My Michigan Refund?

Where’s My Michigan Refund?

You may be asking yourself, ” Where’s My Michigan Refund? ”

Don’t worry, To check the status of your Michigan state refund online, visit Michigan.gov.

Michigan refundIn order to view status information, you will be prompted to enter:

Note: Adjusted Gross Income is found on line 10 of your MI-1040. Total Household Resources are found on line 33 of your MI-1040CR or line 34 of your MI-1040CR-7

You may also call 1-517-636-4486.

For e-filed returns: Allow two weeks from the date you received confirmation that your e-filed state return was accepted before checking for information.

For Paper-filed returns: Allow six to eight weeks before checking for information.

What can cause a delay in my Michigan refund?

A number of things can cause a delay in your Michigan refund, including the following:

  • If the department needs to verify information reported on your return or request additional information, the process will take longer.
  • Math errors in your return or other adjustments.
  • You used more than one form type to complete your return.
  • Your return was missing information or incomplete.

Need more Michigan refund and tax information?

For more information about your Michigan refund, visit the following website:

Need more tax guidance?

Please Contact ATS Advisors to talk with one of our tax professionals regarding any tax related questions you have.

 

Where’s My Michigan Refund? – 2022

How Long Should I Keep My Tax Records Michigan

Tax Forms Retention Guide: How long is long enough?

April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail? How Long Should I Keep My Tax Records Michigan?

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists.To be safe, use the following guidelines.

Business Documents To Keep For One Year

  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets
  • Requisitions
  • Stenographer’s Notebooks
  • Stockroom Withdrawal Forms

Business Documents To Keep For Three Years

  • Employee Personnel Records (after termination)
  • Employment Applications
  • Expired Insurance Policies
  • General Correspondence
  • Internal Audit Reports
  • Internal Reports
  • Petty Cash Vouchers
  • Physical Inventory Tags
  • Savings Bond Registration Records of Employees
  • Time Cards For Hourly Employees

Business Documents To Keep For Six Years

  • Accident Reports, Claims
  • Accounts Payable Ledgers and Schedules
  • Accounts Receivable Ledgers and Schedules
  • Bank Statements and Reconciliations
  • Cancelled Checks
  • Cancelled Stock and Bond Certificates
  • Employment Tax Records
  • Expense Analysis and Expense Distribution Schedules
  • Expired Contracts, Leases
  • Expired Option Records
  • Inventories of Products, Materials, Supplies
  • Invoices to Customers
  • Notes Receivable Ledgers, Schedules
  • Payroll Records and Summaries, including payment to pensioners
  • Plant Cost Ledgers
  • Purchasing Department Copies of Purchase Orders
  • Records related to net operating losses (NOL’s)
  • Sales Records
  • Subsidiary Ledgers
  • Time Books
  • Travel and Entertainment Records
  • Vouchers for Payments to Vendors, Employees, etc.
  • Voucher Register, Schedules

Business Records To Keep Forever

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

  • Audit Reports from CPAs/Accountants
  • Cancelled Checks for Important Payments (especially tax payments)
  • Cash Books, Charts of Accounts
  • Contracts, Leases Currently in Effect
  • Corporate Documents (incorporation, charter, by-laws, etc.)
  • Documents substantiating fixed asset additions
  • Deeds
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General and Private Ledgers, Year End Trial Balances
  • Insurance Records, Current Accident Reports, Claims, Policies
  • Investment Trade Confirmations
  • IRS Revenue Agent Reports
  • Journals
  • Legal Records, Correspondence and Other Important Matters
  • Minutes Books of Directors and Stockholders
  • Mortgages, Bills of Sale
  • Property Appraisals by Outside Appraisers
  • Property Records
  • Retirement and Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

Personal Documents To Keep For One Year

While it’s important to keep year-end mutual fund and IRA contribution statements forever, you don’t have to save monthly and quarterly statements once the year-end statement has arrived.

Personal Documents To Keep For Three Years

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Personal Documents To Keep For Six Years

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Property Records / Improvement Receipts (or six years after property sold)
  • Investment Trade Confirmations
  • Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

Special Circumstances

  • Car Records (keep until the car is sold)
  • Credit Card Receipts (keep until verified on your statement)
  • Insurance Policies (keep for the life of the policy)
  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
  • Pay Stubs (keep until reconciled with your W-2)
  • Sales Receipts (keep for life of the warranty)
  • Stock and Bond Records (keep for 6 years beyond selling)
  • Warranties and Instructions (keep for the life of the product)
  • Other Bills (keep until payment is verified on the next bill)
  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

 

Questions? Contact your trusted Michigan tax pros!

How Long Should I Keep My Tax Records Michigan? – 2022

Michigan Income Tax Calculator

Welcome to ATS Advisors, your trusted Michigan tax professionals!

Listed here is a free Michigan Income Tax Calculator: CLICK HERE

Questions? Contact ATS Advisors today!

What You Need To Know About Michigan State Taxes

The state of Michigan requires you to pay taxes if you’re a resident or nonresident that receives income from a Michigan source. The state income tax rate is 4.25%, and the sales tax rate is 6%.

Michigan Income Tax Brackets and Rates

Michigan has a flat tax rate of 4.25% for 2021, meaning everyone pays the same state income tax regardless of their income.

Michigan Tax Exemptions You Didn’t Know About

Located in the State of Michigans 2021 Taxpayer guide is 5 Michigan Tax Exemptions You Didn’t Know About!

Lets begin…

PRINCIPAL RESIDENCE EXEMPTION: A principal residence is exempt from taxes levied by a local school district for operating purposes of up to 18 mills. A homeowner’s principal residence is defined as “the one place where an owner of the property has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return and that shall continue as a principal residence until another principal residence is established.” Property owners may claim only one exemption. A married couple, filing income tax returns jointly, are generally entitled to no more than one principal residence exemption. However, there are exceptions to these rules. The law allows a temporary, additional exemption for up to three years on an unoccupied homestead listed for sale. Homeowners with a principal residence exemption currently residing in a nursing home, assisted living facility, or other location while convalescing and members of the armed services absent on active duty may maintain the exemption so long as they continue to own and maintain the property, they do not establish a new primary residence, and the property is not used for most commercial and business purposes. A homeowner who vacates their home because of damage or destruction may maintain the exemption for up to three years as long as they demonstrate an intent to move back in. To be eligible for the homeowner’s principal residence property exemption, a taxpayer must file an affidavit with the local tax collecting unit on or before June 1 for an exemption from the immediately succeeding summer tax levy and November 1 for an exemption from the immediately succeeding winter tax levy. Once filed, exemptions are valid in future years until rescinded. A denial of this exemption may be appealed to the Michigan Tax Tribunal. The appeal must be filed within 35 days from date of notice.

 

FARMLAND (QUALIFIED AGRICULTURAL) PROPERTY EXEMPTION: Farmland may be exempt from taxes levied by a local school district for operating purposes of up to 18 mills. Farmland must be determined to be qualified agricultural property. The state has defined qualified agricultural property as “unoccupied property and related buildings classified as agricultural, or other unoccupied property and related buildings located on that property devoted primarily to agricultural use.” If a property is classified as agricultural for assessment purposes, a property owner does not need to take any action to receive the exemption, unless requested by the local assessor. Otherwise, a property owner must claim an exemption by filing an affidavit with the local tax collecting unit on or before May 1. In some cases, a partial exemption may be approved if part of the property is used for non-agricultural purposes. An exemption remains in place unless withdrawn or until rescinded. A denial of an exemption may be appealed to the local board of review. A board of review decision may be appealed to the Michigan Tax Tribunal within 35 days from the decision.

 

POVERTY EXEMPTION: A person may be eligible to request a poverty exemption from property taxes if they, at a minimum, own and occupy the property as their homestead, demonstrate evidence of ownership and identification, and meet poverty income standards. The local board of review makes the determination if the exemption should be granted or denied based on the guidelines for both income and asset levels adopted by the local unit of government. To be eligible for an exemption, a homeowner must apply to the local assessing unit after January 1 but before the day prior to the last day of the board of review. In certain jurisdictions, where permitted by resolution of the local governmental unit, a person who received the exemption in 2019, 2020, or both, or was approved for the first time in 2021, and receives a fixed income from public assistance may receive the exemption for up to 3 additional years without reapplication. March board of review denials may be appealed to the Michigan Tax Tribunal by the end of July. July and December board of review denials must be appealed to the Michigan Tax Tribunal within 35 days of notice.

 

DISABLED VETERANS EXEMPTION: Property owned and used as a homestead by a disabled and honorably discharged veteran is exempt from Michigan property taxes. To be eligible for this exemption, a disabled veteran must be determined by the U.S. Department of Veterans Affairs to be permanently or totally disabled as a result of military service and entitled to veterans’ benefits at the 100% rate, have a certificate from the U.S. Veterans Administration certifying that they are receiving or have received pecuniary assistance due to disability for special adaptive housing, or be rated by the U.S Department of Veterans Affairs as individually unemployable. This exemption is also available to an unremarried surviving spouse of a disabled veteran. An affidavit to qualify for this exemption must be filed annually with the local tax unit. A claim for the exemption is reviewed by the local board of review. A board of review decision may be appealed to the Michigan Tax Tribunal.

 

FARMLAND DEVELOPMENT RIGHTS AGREEMENT OR EASEMENT EXEMPTION: Property owners who own farmland covered by a development rights agreement or easement with the state are exempt from special assessments for sanitary sewers, water, lights, and nonfarm drainage on land covered by the agreement or easement. The exemption does not apply to assessments in place prior to entering into an agreement or easement. In addition, the property owner cannot take advantage of the services financed through the assessment on the exempted land and may be required to pay the assessment if the agreement or easement is ended.

As always, If you have any tax questions, please never hesitate to contact us!

Michigan Tax Exemptions You Didn’t Know About – 2021

Tax Information for Michigan Students

Listed below is some useful Tax Information for Michigan Students:

American Opportunity Credit

  • Maximum Credit: Up to $2,500 per eligible student annually
  • Limit on modified adjusted gross income: $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er)
  • Refundable or nonrefundable: 40 percent of credit may be refundable; the rest is nonrefundable
  • Number of years of postsecondary education: Available only for the first four years of postsecondary education
  • Number of tax years credit available: Available only for four tax years per eligible student, including any year(s) Hope credit was claimed
  • Type of degree required: Undergraduate or graduate degree
  • Number of courses: Student must be enrolled at least half time for at least one academic period that begins during the year
  • Felony drug conviction: No felony drug convictions on student’s records
  • Qualified expenses: Tuition and fees required for enrollment; course-related books, supplies, and equipment do not need to be purchased from the institution in order to qualify

Lifetime Learning Credit

  • Maximum Credit: Up to $2,000 credit per return
  • Limit on modified adjusted gross income: $160,000 if married jointly; $80,000 if single, head of household, or qualifying widow(er)
  • Refundable or nonrefundable: Nonrefundable—credit limited to the amount of tax you must pay on your taxable income
  • Number of years of post-secondary education: Available for all years of post-secondary education and for courses to acquire or improve job skills
  • Number of tax years credit available: Available for an unlimited number of years
  • Type of degree required: Undergraduate or graduate degree or non-degree courses to acquire or improve job skills
  • Felony drug conviction: Felony drug convictions are permitted
  • Qualified expenses: Tuition and fees required for enrollment, including amounts required to be paid to the institution for course-related books, supplies, and equipment

Student Loan Interest Deduction

  • Maximum benefit: You can reduce your income subject to tax by up to $2,500
  • Loan qualifications: Your student loan must have been taken out solely to pay qualified education expenses and cannot be from a related person or made under a qualified employer plan.
  • Student Qualifications: The student must be a taxpayer, taxpayer’s spouse, or taxpayer’s dependent and enrolled at least half-time in a degree program.
  • Time limit on deduction: You can deduct interest paid during the remaining period of your student loan.
  • Limit on modified adjusted gross income: $175,000 if married filing a joint return; $85,000 if single, head of household, or qualifying widow(er)

Coverdell Education Savings Account

A Coverdell ESA is set up to pay the qualified education expenses of a designated beneficiary.

Where can it be established?

It can be opened in the United States at any bank or other IRS-approved entity that covers Coverdell ESAs.

Who can have a Coverdell ESA?

Any beneficiary who is under the age 18 or is a special needs beneficiary.

Who can contribute to this ESA?

Generally, any individual (including a beneficiary) whose modified adjusted gross income for the year is less than the IRS limits.

Are distributions tax free?

Yes, if the distributions are not more than the beneficiary’s adjusted qualified education expenses for the year.

Education Savings Bonds

You may be able to cash in qualified US savings bonds without having to include in your income some or all of the interest earned on the bonds, if you meet the following conditions:

  • you pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return;
  • your modified adjusted gross income is less than the IRS limits; and
  • your filing status is not married filing separately.

Scholarships and Fellowships

A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate.

A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.

Scholarships and Fellowships are tax free only if

  • the student is a candidate for a degree at an eligible educational institution; and
  • the aid is used to pay for qualified education expenses:
    • tuition and fees required to enroll or attend an eligible educational institution, or
    • course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Expenses don’t include room and board, travel, research, clerical help, or equipment and other expenses that are not required for enrollment or attendance.

Qualified Tuition Program (QTP)

  • Qualified tuition programs are also called “529 plans.”
  • States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student’s qualified education expenses at a postsecondary institution. Eligible educational institutions may establish and maintain programs that allow you to prepay a student’s qualified education expenses. If you prepay tuition, the student will be entitled to a waiver or a payment of qualified education expenses. You cannot deduct either payments or contributions to a QTP. For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it.
  • The tax benefit of a QTP is that no tax is due on a distribution for a QTP unless the amount distributed is greater than qualified educational expenses.

Business Deduction for Work-Related Education

  • If you are an employee and can itemize deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2 percent of your adjusted gross income.
  • If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. This reduces the amount of your income subject to both tax and self-employment tax.
  • Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the American Opportunity and Lifetime Learning credits. You may qualify for these benefits even if you do not meet the requirements listed above.

Qualifying Work-Related Education

You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests:

  • The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
  • The education maintains or improves skills needed in your present work.

However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it is

  • needed to meet the minimum educational requirements of your present trade or business, or
  • part of a program or study that will qualify you for a new trade or business.

If you have any questions please contact us today!

9 Tax Tips for Small Businesses in Michigan

May 26, 2020 – Sourced from Nationwide

Running a business is hard enough without adding the complexity of filing taxes each year. The key, experts say, is to work with your accountant throughout the year, not just when you prepare your tax return. Making financial decisions without consulting an accountant or financial advisor can put you at risk and cost you more money in the long run. Here at ATS Advisors, we strive to offer more than just tax solutions. We strive to offer solutions that will help mold and shape the financial wellbeing for all of our clients.

Here are 9 tax tips for small businesses in Michigan:

1. Hire the right accountant

Your accountant should offer to do more than just prepare financial statements and do your taxes. If that’s all they offer to do, then they aren’t the right accountant for a small business. Your accountant should work with you throughout the year to track income and spending, to make sure you don’t have a cash flow problem, and to monitor your gross and net profits. Work with your accountant from day one of opening your business, not just in March and April for tax season.

2. Claim all income that is reported to the IRS

The IRS gets a copy of the 1099-MISC forms you receive so they can match the income you’ve reported against what they know you’ve received. Make sure the income you report to the IRS matches the amount of income reported in the 1099s you received. Not doing so is a red flag for the IRS. Even if a client doesn’t send out a 1099, you still need to report that income. The same rules apply with state taxes.

3. Keep adequate records

Keeping thorough and accurate records throughout the year will ensure your tax return is correct. With inadequate record keeping, you could be leaving deductions on the table or, worse, you could be putting yourself at risk for an audit. Almost all CPA’s recommends every business invest in a basic version of an accounting software because it is user friendly, inexpensive, and helps you keep track of all your income and expenses.

4. Separate business from personal expenses

If the IRS audits your business and finds personal expenses mixed with business expenses, regardless of whether you reported business expenses correctly, the IRS could start looking at your personal accounts because of commingled money. Always get a separate bank account and credit card for your business and run only business expenses through those accounts.

5. Understand the difference between net and gross income

If your product costs more money to make than you charge for it, you will lose money regardless of how many units you sell. Small business owners often forget to take into account the difference between their net and gross income.

For instance, if it costs $100 to make your product and you sell it for $150, your gross income is $50. But, he says, after you deduct your expenses, your net income might drop to $10. It’s important to know what your gross and net profits are so you can be more profitable and grow your business. Numbers don’t lie!

6. Correctly classify your business

Failing to properly classify your business could result in overpaying taxes. Deciding whether to classify your company as either a C Corporation, S Corporation, Limited Liability Partnership, Limited Liability Company, Single Member LLC or Sole Proprietor will have a different effect on your taxes. It’s important that small businesses consult with an attorney and accountant to determine how their businesses should be classified.

7. Manage payroll

Most CPAs recommends hiring a company to assist with payroll – but be sure that the company is reputable. To save money, some business owners will hire a lesser-known payroll service, only to find out later the service wasn’t remitting payroll taxes for the company. If that happens, the business owners are on the hook for the payroll taxes. The IRS typically checks every quarter to see if payroll taxes have been paid.

8. Seek your accountant’s advice on your business plan

A good accountant gives you advice on how to grow your business. Seek their advice to determine how much to contribute to your retirement fund and whether you should take a bonus or delay it a year. Your accountant can tell you if buying a small space for your store or business – rather than renting – could save you money.

9. Take advantage of capitalization rules

If you acquire a tangible piece of property or equipment for your business, you may be able to take a significant deduction.

 

Those were our 9 Tax Tips for Small Businesses in Michigan! Hope you enjoyed.

If you have any questions regarding any of these tax tips, please reach out to ATS Advisors and talk with us today!

5 Michigan Tax Tips for Michigan Homebuyers

5 Michigan Tax Tips for Michigan Homebuyers: Home buyers and home sellers may not want to think about real estate transaction taxes, but they are inevitable. You may be liable for any number of federal, state or local taxes upon a sale’s completion. Here’s what you need to know about Michigan real estate taxes.

They are the last thing any home seller or buyer wants to think about in a real estate transaction. What are its tax implications, how much are they, and who pays?

How much you have to pay and if you have to a particular real estate tax at all depends on a number of factors. When it comes to one particular tax, the buyer and seller can even negotiate who pays it.

Having the right guidance to get you through the tax maze can save your tens-of-thousands of dollars. Whether you’re buying or selling, you will want to work with a professional realtor who knows the ins and outs of real estate taxes.

Here’s 5 Michigan Tax Tips for Michigan Homebuyers to get you started and if you have any other questions CONTACT ATS ADVISORS today!

1. Will You Have to Pay Taxes When You Sell Your Home in Michigan?

If you’re a typical home seller in Michigan, you do not need to report your capital gain to the IRS after the sale. However, this does not apply to everyone. If you file as a single person and you sell your home for a capital gain of more than $250,000 (more than $500,000 if you file a joint return), you may have to pay a capital gain on money you earn in excess of the $250,000 limit.

Anyone who has lived in a home as their primary residence for at least two years (of the previous five) before the sale does not have to pay a capital gain below $250,000.

Here’s how to calculate your capital gain. Take the price that you paid for the purchase price and subtract it from the final sale. So, if you bought a home for $300,000 three years ago, lived in it during that time, and then sold it for $600,000, your capital gain would be $50,000.

That’s the money you may owe taxes on. But this amount can be reduced. If you made $60,000 worth of repairs and home improvements to the property, you can deduct this from the capital gain. To do this, just add $60,000 to $300,000 to the amount of the home’s purchase price.

Now, your net gain on the property is just $240,000, which is below the capital gain limit for a single person. The IRS guide on capital gains from home purchases notes that there are sellers who may want to report their capital gain as a taxable gain even though some or all of it is eligible for exclusion.

Sellers who may want to do this include homeowners who plan to sell another home within the next two years (and expect to receive a bigger gain from the sale of that other property). Because tax laws are quite complicated in Michigan, all home sellers should seek professional guidance.

local real estate agent will be able to help you determine what your tax liabilities may be. They buy and sell homes everyday and they understand local, state, and federal real estate laws. They are highly knowledgeable and will be able to suggest ways that you can reduce your tax burden on the home sale.

2. How Much Are Real Estate Transfer Taxes in Michigan (and Who Pays Them)?

Real estate transfer taxes can be complicated because several jurisdictions may be responsible for them. They can be imposed by states, counties, or municipal authorities. A real estate transfer tax is typically charged on the transfer of legal deeds, titles to a property, or certificates that are transferred when a buyer formally agrees to the purchase.

These are what are known as ad valorem taxes. An ad valorem tax is based on the assessed value of the item being sold, in this case the home. So, the tax is based on the property value and it is usually the responsibility of the seller.

It’s important to note that a home purchase is a negotiation and that there are no firm rules. A home seller and home buyer can negotiate who pays the transfer tax in most states. So, the tax (and many other parts of a home sale) is negotiable, at least when it comes to who pays for it. It is not unusual for a seller and buyer to come to an agreement where they split the cost of the tax.

Unfortunately, Michigan is not one of the five states (Mississippi, New Mexico, Missouri, Wyoming, and North Dakota) without the transfer tax, which can be hefty. The state transfer tax rate is $3.75 for every $500 of value transferred. There is also a county transfer tax rate in Michigan. It’s $0.55 for every $500 of value transferred. (In some counties the tax rate can be up to $0.75/$1000 of value transferred.)

There are transfer tax exemptions, and a professional realtor will be able to help you take full advantage of them. Exemptions apply in some sales to family members and to the financing of some property sales. Your Clever Partner Agent will be able to guide you through any deductibles you may be entitled to or connect you to a professional tax advisor so that you do not pay more than you have to after the sale.

3. How to Calculate Property Taxes in Michigan

Property taxes are another ad valorem tax. In other words, they are assessed on the value of your property. They can vary greatly from state-to-state, city-to-city, and even neighborhood-to-neighborhood.

The reason for major differences on what you pay in property taxes is due to the fact that they pay for services in the community where the property is located. For example, they may be used for community centers, school funding, roads, etc.

The quality of these services is often dependent on the amount of money a particular neighborhood takes in from property taxes. The more the community collects in property tax revenue, the more they can spend on services for those taxpayers.

As noted above, property taxes are calculated based on the value of your property. This can be done through several methods. In what’s termed a “sales comparison,” the assessor will calculate the value of your home based on other similar properties that have recently sold in the neighborhood. The criteria they use can include the state of the property, the overall market conditions in the area, and the costs of any improvements that are made on the property and any structures on it.

An assessor may also use the “cost method.” In this method, the assessor determines how much it would cost to rebuild your home from scratch. If this method is used, the cost of depreciation is factored into the assessment. Lastly, an assessor can also use what’s called the “income method.” This is used primarily in commercial and business property transactions.

Unfortunately for Michigan homeowners, the state has one of the highest property tax rates in the U.S. Its average tax rate is 1.83%. In Saint Clair County, it’s slightly less at 1.6%. At that rate, a homeowner with a property worth $250,000 would pay $4,080 in taxes a year.

That’s more than $1,000 more than the national average. Across the state, Michigan homeowners with properties worth $250,000 pay almost $1,600 more each year than the national average.

It’s something that home buyers need to factor into their budgets. Various municipalities in Michigan set their own dates for when they are due. So, it’s important that you save an appropriate amount each month, although you may only have to pay them quarterly or less infrequently.

4. Tax Breaks for Michigan Home Buyers & Sellers

Michigan home buyers and sellers have a variety of federal and state tax deductions available to them. A Clever Partner Agent can answer any questions that you may have or guide you to a tax professional, potentially saving you thousands of dollars a year. Here are some key deductions that are available.

The Mortgage Interest Deduction

This allows home buyers to deduct the interest from mortgages up to $750,000. These tax credits also allow the lender the option to include the estimated tax credit when calculating the debt-to-income ratio, so it can help make homeownership easier.

Property Taxes

Property taxes are deductible on your 1040 Form (up to $10,000). But be careful to read the fine print (or ask a tax professional) when it comes to the requirements.

Tax breaks for home sellers include:

Costs of Home Improvement Repairs and Improvements

Any home improvements or repairs to a property can be tax deductible. So, it’s important to keep all of your receipts. And remember, there are time limits. The repairs and improvements typically have to made within 90 days of the closing date.

Selling Costs

Home sellers can also reduce their income tax by the amount of their selling costs. These may be costs associated with title insurance, broker’s commissions, inspection fees, and any repairs made to the property.

5. The Next Step

Whether you’re buying a home or selling one, there are tax implications to the sale of property. You need to be fully aware of your responsibilities and tax liabilities. That’s why it’s essential that you speak to a Clever Partner Agent.

They can help you determine what all of the costs of selling a home will entail. If you’re a home buyer, they’ll help you work through a complete budget that can get you into your own home, sometimes even for the same amount you may be paying for rent.

They can also point you to professional tax advisors who can let you know about the variety of tax programs, credits, and other benefits you may be entitled to. These can save buyers and sellers thousands of dollars.