Archive for the Michigan Taxes Category

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.

Michigan Residential Solar Tax Credits

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

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.

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

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 Basics

A 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.

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

• Assessor Guide to Eligible Manufacturing Personal Property Tax Exemption and Essential Services Assessment
• Bulletin 2 of 2017 – Electronic Filing
  

  Forms

  • Required Form – Eligible Manufacturing Personal Property Tax Exemption Claim, Personal Property Statement, and Report of Fair Market Value of Qualified New and Previously Existing Personal Property (Form 5278)
  • Form 5277 – Affidavit to Rescind Exemption of Eligible Manufacturing Personal Property Defined in MCL 211.9(m) and 211.9(n)
  • Form 632 – 2019 Personal Property Statement (As of 12-31-18)

  Education Materials

  • Memorandum Regarding Calculating Taxable Value for Personal Property
  • STC Guidance on Personal Property Reporting
  • STC Notice to Assessors Regarding Personal Property Account Numbers
  • STC Additional Guidance Regarding Personal Property Account Numbers
  • Personal Property Frequently Asked Questions

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

• Form 5076 – Small Business Property Tax Exemption Claim Under MCL 211.9o
• Form 5379 – Assessor Affidavit to Correct Taxable Value After Denial of Eligible Personal Property Exemption Granted pursuant to MCL 211.9o
• Assessor Denial of Request for Exemption as EPP (Small Business Taxpayer Exemption), as Defined in MCL 211.9o Sample Form
• Form 5618 – Request to Rescind the Small Business Property Tax Exemption Claim Under MCL 211.9o