5 Michigan Tax Hacks to Save!

5 Michigan Tax Hacks to Save!

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 Nexus Rules

Michigan Nexus Rules

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.

Read More from Michigan.gov/taxes

Michigan LLC Tax Deadline

Michigan LLC Tax Deadline

Have any Michigan Tax questions? Give ATS a call, or stop by and see us!

Michigan Corporation and LLC Annual Filing Requirements

  • The deadline for paying your business tax is April 30 or the end of the fourth month following the end of the tax year.
  • You are required to file an annual statement for your LLC in the state of Michigan.
  • Annual Statements must be filed each year no later than February 15. However, a new LLC formed after September 30 does not need to file until the following February 15.
  • Your registered agent will receive the pre-printed annual statement form about three months before the due date or you can complete it online.
  • It costs $25 to file a Profit Corporation Annual Report and $20 to file a Non-Profit Corporation Annual Report. The cost of filing an annual statement for a Michigan LCC is $25.
  • The penalty for late filing is $10 per month or part month with a maximum of $50. These penalties are applied from May 16.
  • You can file your annual report online for which a Visa or Mastercard is necessary.
  • The corporation’s registered agent will receive the pre-printed report at their registered address.
  • If you do not file for an update then your corporation will be dissolved or withdrawn. Before this happens, the notice of dissolution or revocation and information about the missing updates will be sent to the corporation’s registered agent.
  • Profit annual reports must be filed no later than May 15 and Non-profit annual reports must be filed no later than October 1.
  • Online filing is available 90 days before the due date of the report or statement. To access the form you will need your LLC’s state-issued entity ID number.
  • To complete the Annual Statement form you need your resident agent’s name and address as well as your limited liability company’s registered address.
  • As a pass-through tax entity, most LLC’s do not pay federal income taxes as responsibility for this falls on their individual members.
  • Although some states apply a separate tax on LLCs for carrying out business there, Michigan does not.
  • If preferred, an LLC company can choose to be taxed as a corporation by filing an IRS Form 2553.

The Michigan Business Tax

The new law means that business income will be now taxed at 4.95 percent, the tax base being federal taxable income from business activity. Special provisions result in various taxpayers, such as construction contractors and auto dealers, have a reduced tax base as Business Income Tax and Modified Gross Receipt Tax will now be based on sales in Michigan.

A 21.99 percent surcharge is imposed and applies to the Michigan Business Tax liability generated by the Business Income Tax and Modified Gross Receipts Tax before any credit reductions. This will not exceed $6 million for any one taxpayer.

The Modified Gross Receipts Tax of 0.8 percent applies to all of the company’s gross receipts excluding any purchases from other firms or tax collected by the business. These purchases include:

  • Inventory that was purchased during the tax year and other depreciable assets.
  • Materials and supplies (this includes repair parts and fuel.)
  • Compensation of staff supplied to customers of a staffing company.
  • Payments by certain contractors to subcontractors.

Michigan Business Income Tax Extensions

If you miss the Michigan LLC Tax Deadline (business tax deadline) Four-month business extensions can be granted which gives you an additional 4 months after the end of your tax year. You can apply for this by filing Form 4 prior to your original deadline. Payment of your tax balance must still be made on time or penalties will have to be paid even if you are granted this extension. If tax is owed, then this must be paid with your Form 4 application. The Federal tax extension (IRS Form 7004) will not extend the deadline for your Michigan business filing.

Doing Business in Other States

If you carry out business in other states then you may need to register your LLC in those states. You need to find out the rules for the state where you are carrying out business. If you use another state as a business location, hire employees, or advertise your business there, you are likely to be regarded as doing business in that state. To register an out-of-state business, you will probably need a certificate of authority or similar document from that state.

Michigan LLC Tax Deadline – 2023

Michigan Pension Tax 2023

Public Act 4 of 2023 – Retirement State Tax Changes

Public Act (PA) 4 of 2023 (formerly House Bill 4001 of 2023) was recently signed by Gov. Gretchen Whitmer. The bill did not receive sufficient votes for immediate effect; thus, it won’t be effective until 90 days after the sine die adjournment, meaning 90 days after the adjournment of the current legislative session. The session will adjourn around the end of the calendar year, so the law will take effect sometime in March 2024.

PA 4 of 2023 phases in an income tax reduction for retirees over the course of four years, beginning with the 2023 tax year (filed in 2024). It allows retirees to choose between the limitations on the deductibility of retirement and pension income as outlined in the Income Tax Act of 1967, or the new limitations as outlined in PA 4 of 2023 (see comparison charts below). Retirees who want to use the limits of the new law should file their 2023 tax return after the law’s effective date. If filing before the law’s effective date, an amended return can be filed after PA 4 of 2023 takes effect.

For joint returns, the birth year of the older spouse can be used.

Public schools FAQs for Public Act 4 of 2023 – Retirement State Tax Changes

*Maximum amounts are adjusted annually for inflation and available each January.

The Michigan Office of Retirement Services will continue to evaluate what the new law means for our members as the phase-in continues. Please consult a tax professional regarding any questions you may have. For direct information, you can review the full law here. You may want to go here if you want to know the exact language used in PA 4 of 2023.

Source – Public Act 4 of 2023 – State of Michigan

Michigan Pension Tax 2023

Can I Use Michigan MESP For High School?

Can I Use Michigan MESP For High School?

Need Help? Have a tax question? Talk to a Michigan Advisor

 

Thanks to the 2017 Tax Cuts and Jobs Act, you can now use 529 savings plans to pay up to $10,000 per student per year for private, public or religious elementary, middle, and high school tuition. Some private elementary and high schools charge up to $30K per year, making the use of MESP funds a viable option to provide some tax savings.

The MESP

The Michigan Education Savings Plan (MESP) is a 529 college savings plan. The biggest benefit that the MESP offers over other savings accounts is the tax benefits. When you contribute to the MESP you are able to deduct Michigan state taxes on up to $10,000 of contributions per year. Like a Roth IRA, the funds are invested and grow for you tax-free. The MESP can then be withdrawn to pay for college costs completely tax-free. The other nice thing about the MESP is that your child can attend any school in the country and is not limited to Michigan schools.

The biggest drawback of the MESP is the restrictions on how the funds can be used.  In order to get the tax benefits of the MESP, the funds must be used for college costs. However, there was a change to the MESP and other 529 plans in the most recent tax law. 529 plans, like the MESP, can now be used to pay for private elementary and high school tuition and expenses. $10,000 is the current annual cap for private elementary and high school costs that can be covered by the MESP. Any other use of the funds and there are taxes and penalties on any of the tax-free growth on the account.  If your child doesn’t end up going to college or if he needs the funds to help pay for other expenses, the taxes and fees could really add up!

Can I Use Michigan MESP For High School? – ATS Advisors 2023

Michigan 529 Plan Tax Deduction

Michigan 529 Plan Tax Deduction

Michigan 529 Basics

529 plan is a tax-advantaged savings/investment plan designed to encourage saving for the future expenses of a designated beneficiary (typically one’s child or grandchild). The plans are named after Section 529 of the Internal Revenue Code and are administered by state agencies and organizations.

Have a 529 Tax question and live in Michigan? Give ATS Advisors a call or send us an email!

Michigan 529 Plan Tax Deduction?

All 529 account investment earnings are exempt from state and federal taxes. Withdrawals made for qualified expenses — which now include both K-12 and college education costs — are not penalized by taxes.

Michigan law further provides a state tax deduction for contributions made to a Michigan Education Savings Program (529) account, up to $5,000 for individuals and $10,000 for joint filers. The Michigan 529 Plan Tax Deduction is available for the amount of contributions minus the amount of qualified withdrawals made within a given tax year.

Types of Section 529 College Savings Plans:

There are two types of 529 college savings plans: prepaid tuition plans and savings plans:

  • Prepaid Tuition Plans allow for the pre-purchase of tuition based on today’s rates and then paid out at the future cost when the beneficiary is in college. Performance is often based upon tuition inflation. Prepaid plans may be administered by states or higher education institutions.

– The Michigan Education Trust (MET) is Michigan’s 529 prepaid tuition plan.

  • Savings Plans are different in that your account earnings are based upon the market performance of the underlying investments, which typically consist of mutual funds. Savings plans may only be administered by states.

– The Michigan Education Savings Program (MESP) is Michigan’s direct sold 529 savings plan.

– The MI 529 Advisor Plan is Michigan’s advisor sold savings plan.

 

How do 529 accounts work?

529 accounts are education savings plans operated by a state or educational institution. They are named after Section 529 of the U.S. Internal Revenue Code that governs these types of savings plans. Contributions earn money from investments and are able to be used for an individual child’s educational expenses.

What kind of K-12 expenses can 529 dollars now be used for tax-free?

Changes made in 2017 to the federal tax code expand the definition of qualified expenses to include “tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.” This does not include tuition for pre-kindergarten schools or programs.

Legislation currently being considered by Congress would further expand the definition to include homeschool expenses, as well as several types of expenses that could benefit children enrolled in public or private schools: curriculum or online educational materials; tutoring services; AP, SAT, ACT or standardized achievement tests; dual enrollment higher-education programs; or therapies to help students with disabilities or other special learning needs.

Are separate 529 accounts needed for a child’s K-12 expenses and college expenses?

No. Federal law expanded the definition of qualified expense to include tuition for elementary and secondary education. This is in effect for 2018. A single 529 account for each child (considered the “designated beneficiary”) now may be used to pay for either elementary and secondary tuition, higher education expenses or both.

Who can set up a 529 account?

Any person can set up a 529 account and name an individual child as a beneficiary. Individuals do not need to have set up a 529 account in order to make contributions. Per IRS guidance, anyone can set up a 529 and name anyone as a beneficiary — a relative, a friend, even themselves. Check out the case studies below to see sample scenarios that show how a 529 plan may benefit a family like yours.

Michigan law also enables any of the following to open and contribute specifically to MESP accounts: “A state or local government agency or instrumentality, an entity exempt from taxation under section 501(c)(3) of the internal revenue code, an estate or trust, or a corporation that enters into a Michigan education savings program agreement.”

Are there any limits on 529 accounts?

There is no limit on 529 withdrawals to pay for higher education, but federal law limits withdrawals for elementary and secondary education expenses to $10,000 per year. Different 529 plans have maximum allowable account balances. For example, the MESP limits the amount to $500,000.

Also, according to the website 529 K12 Facts: “You can donate up to $15,000 per year ($30,000 if married filing jointly) beginning in tax year 2018 without incurring federal gift tax. Contributions of up to $75,000 ($150,000 if married filing jointly) also can be treated as having been made over a five-year period, for federal gift tax purposes.”

 

529 Example:

Parents start saving in a 529 plan at their child’s birth, contributing $250/month for 14 years (equaling $42,000). The tax-

deferred growth in the 529 plan’s earnings means $10,000 more of their own funds are available than if

 they had invested in a standard taxable account. They decide to enroll their child in a private high school. Enough money is there to pay up to $10,000 for each year’s tuition, with remaining plan dollars free to help pay for higher education.

Michigan Personal Property Tax Exemption 2023

Michigan Personal Property Tax Exemption 2023

Questions about the Michigan Personal Property Tax Exemption 2023 ?

Contact Plymouth Michigans ATS Advisors!

The General Property Tax Act provides for exemptions for certain categories of personal property including: Small Business Taxpayer Exemption, Eligible Manufacturing Personal Property and Act 328 – New Personal Property. These links will provide information on each of these exemptions including determining eligibility and how to claim the exemption. Email us if you have questions at State-Tax-Commission@michigan.gov.

Eligible Manufacturing Personal Property (EMPP) MCL 211.9m and MCL 211.9n Exemption

Beginning December 31, 2015, qualified new personal property and qualified previously existing personal property is exempt from taxation.

Qualified New Personal Property is defined as property that was initially placed in service in this state or outside of the state after December 31, 2012 or that was construction in progress on or after December 31, 2012 that had not been placed in service in this state or outside of this state before 2013 and is eligible manufacturing personal property (EMPP).

Qualified Previously Existing Personal Property means personal property that was first placed in service within this state or outside of this state more than 10 years before the current calendar year and is eligible manufacturing personal property (EMPP).

Bulletins

Small Business Taxpayer Exemption – MCL 211.9o

The small business taxpayer personal property exemption provides a complete exemption from personal property tax for industrial or commercial personal property when the combined true cash value of all industrial personal property and commercial personal property owned by, leased by or in the possession of the owner or a related entity claiming the exemption is less than $80,000 in the local tax collecting unit and the property is not leased to or used by a person that previously owned the property or a person that, directly or indirectly controls, is controlled by, or under common control with the person that previously owned the property. Form 5076 must be filed with the local tax collecting unit no later than February 20.

Statute

Assessor Guide to Small Business Taxpayer Exemption

Forms

Plymouth Michigan Property Tax

Plymouth Michigan Property Tax

Are you a new or existing Plymouth, MI resident? Wondering about Plymouth Michigan Property Tax or what taxes Plymouth has?

Give your trusted ATS Plymouth tax advisors a call!

 

Summer Taxes

Your summer tax bill includes the tax levies for:

  • City of Plymouth
  • Plymouth-Canton Schools
  • State Education Tax (SET)
  • Wayne County Regional Educational Service Agency(RESA)
  • Enhanced Wayne County Regional Educational Service Agency (ENH RESA)
  • Schoolcraft College
  • Wayne County Operating

Summer tax bills are due August 10 annually.

Summer Tax Bills are payable through August 10 without penalty. They may be paid at the City Hall counter, placed in the drop box next to the book return at the library,  or deposited in the drop box in the City Hall lobby if the counter is closed.

 

Winter Taxes

Your winter tax bill includes the tax levies for:

  • Wayne County Voted Millage
  • Wayne County Jail
  • Wayne County Parks
  • Plymouth District Library
  • Huron Clinton Metro Authority
  • Detroit Regional Zoo
  • Detroit Institute of Arts Museum

Winter tax bills are due February 28 each year.

Winter Tax Bills are payable through February 28 without penalty. They may be paid at the City Hall counter, placed in the drop box next to the book return at the library,  or deposited in the drop box in the City Hall lobby if the counter is closed. All tax payments placed in the drop boxes by December 31 will be receipted as paid in the current year. Additional information is provided on the back of your bill. Please review your tax bill to check the correctness of the information appearing on it. If you receive a bill in error, please return the tax bill to the City Treasurer’s Office. If you are the owner or agent of the property but the name or address information is incorrect, please correct it on the bill and mail it back with your payment. If you need additional information, please call the City Treasurer’s Office at 734- 453-1234, during regular business hours.

Here are the current millage rates.

In addition to paying your tax bill in person on via mail, there are several other options.

Online Payments

You can  pay your taxes online via a credit/debit card through the online property information site. There is a convenience fee associated with using this service.

Direct Payment
You may request that your payment be made automatically by completing Direct Payment Enrollment form.


Special Payment Deferments

The State of Michigan has a program that allows certain property owners to defer their tax payments.  Information on this program is available on the state’s website. The Step Forward Michigan program also provides property tax assistance.

Does Michigan Have a State Inheritance Tax?

Does Michigan Have a State Inheritance Tax?

Does Michigan Have a State Inheritance Tax?

Yes, the Inheritance Tax is still in effect, but only for those individuals who inherited from a person who died on or before September 30, 1993.

For heirs of individuals who passed after 1993, inheritances from a Michigan estate that includes only property located in Michigan will not be subject to inheritance tax. But, if the estate includes property located in other states, a beneficiary who inherits the property may be subject to tax in that state.

Although there is technically no longer a Michigan Inheritance Tax, as of 2023 six states still have one: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If you are the heir of a loved one who is a Michigan resident that passed away while owning property in one of these 6 states, you might still have to pay an inheritance tax on that property based on the state’s laws.

There are also certain situations with respect to “After Discovered Assets” where the Michigan Inheritance Tax may still be a problem. Continue reading to learn more…

Have a Question? Contact ATS Advisors

Contact ATS

 

What Does The Michigan Inheritance Tax Consider As An “After Discovered Asset”?

The Michigan Inheritance Tax considers something as an “After Discovered Asset” when an estate has been closed, but a new asset has been found that was not included in the original estate. If this situation applies to you, the Michigan Department of Treasury has instructions on what you should do in this situation.

What Is The Difference Between The Michigan Inheritance Tax And The Estate Tax?

The major difference between the Michigan Inheritance Tax and the Estate Tax is that the Estate Tax is a tax imposed on the estate itself, whereas the Inheritance Tax is a tax on the actual heir of the property.

Does Michigan Have An Estate Tax?

There is no longer a Michigan Inheritance Tax. Additionally, the State of Michigan does not have an Estate Tax either. However, there is a Federal Estate Tax that your estate may be subject to.

What Is The Federal Estate Tax?

The Estate Tax, commonly referred to as the “Death Tax”, is a tax on your right to transfer property at your death. Proper Estate Planning done prior to death can help you reduce both Estate Taxes and Inheritance Taxes if you own property in a state that still has Inheritance Tax.

Does Michigan Have a State Inheritance Tax? – 2023

Is Michigan Tax Friendly For Retirees?

Is Michigan Tax Friendly For Retirees?

Michigan Retiree Tax Information

Is Michigan Tax Friendly For Retirees? In short, Michigan is a relatively tax-friendly destination for retirees. It does not tax Social Security and it provides a sizable deduction for seniors on other types of retirement income. Sales taxes are somewhat below average, while property taxes are above average. Michigan does not have an estate tax or an inheritance tax.

ATS Advisors is a family owned Michigan small business aimed at helping fellow Michiganders with all of their tax and financial situations. Contact ATS to talk to us!

Is Social Security taxable in Michigan?

Social Security payments are not taxed in Michigan. Any Social Security retirement income that is considered taxable on your federal income tax return can be subtracted from your Adjusted Gross Income (AGI) when filing your state taxes in Michigan.

Are other forms of retirement income taxable in Michigan?

Yes, but seniors can deduct most or all of this income. The deduction applies to income from retirement savings accounts and pensions. It varies depending on the age of the filer.

Taxpayers born before 1946 are eligible for a deduction against private pension income of $54,404 per person ($108,808 for joint filers) for tax year 2022. These taxpayers can also subtract interest, dividends and capital gains up to $12,127 for single filers and $24,254 for joint filers. Public pension income is completely exempt.

Taxpayers born between 1946 and 1952 can claim a deduction against all income of $20,000 ($40,000 for joint filers). For income from a government pension, that figure is $35,000 for single filers and $55,000 for joint filers ($70,000 for joint filers if each filer has such a pension). Taxpayers born after 1952 can claim the same deductions once they turn 67.

So, if you had $60,000 of 401(k) income and you were born in 1949, you would be able to deduct $20,000 of that income. The remaining $40,000 would be taxed at the Michigan flat income tax rate of 4.25%.

How high are property taxes in Michigan?

The average effective property tax rate in Michigan is 1.32%, which is pretty high. That adds up to about $1,320 for every $100,000 in home value. Of course, property taxes are higher in some areas than in others. In Wayne County the average effective rate is 2.16%. In Mackinac County, it is less than half that at 1.06%.

What is the Michigan homestead property tax credit?

The homestead property tax credit is available to homeowners in Michigan who meet certain eligibility requirements for income and property value. Homeowners who are eligible can claim a credit on all property taxes owed.

The credit application is filed with your annual income tax return. To be eligible, you must have household income of $60,600 or less and your home’s taxable value must be no more than $136,600. You also need to have owned or were contracted to pay rent while occupying a Michigan homestead for at least 6 months during the year where property taxes and/or service fees were imposed.

You are not eligible if 100% of your household resources were received from the Michigan Department of Health and Human services.

Another form of property tax relief available to homeowners in Michigan is the principal residence exemption, or PRE. This allows homeowners to exempt their primary residence from up to 18 mills of local school district operating taxes. (A mill is one tenth of a percent, so 18 mills is 1.8%, which applies to taxable value.)

How high are sales taxes in Michigan?

The state sales tax rate in Michigan is 6%, which is slightly above average. But because the state has no local sales taxes, its state and local combined rates are also below average.

What other Michigan taxes should I be concerned about?

If you plan on working during retirement, keep in mind that many Michigan cities collect their own income taxes in addition to the state income tax rate of 4.25%. In general, these city income taxes range from about 1% to 1.5%, but the Detroit city income tax is 2.4%. Those taxes do not apply to any form of retirement income, however.

Michigan does not have an estate tax or inheritance tax.