Michigan Taxes on Casino Winnings

On July 19, 2023 / Michigan Taxes

Michigan Gambling And Taxes

Yes, gambling winnings are taxable in Michigan. Need assistance? Call Michigans trusted ATS Advisors

Whether you’ve won money at a Michigan online gambling site, or a retail location, it is subject to Michigan individual income tax, to the extent it is included in your adjusted gross income.

It’s important that you know how and when the Internal Revenue Service might get involved when you win at the blackjack table or your favorite sportsbook.

So, here is a guide for Michigan Taxes on Casino Winnings, including how to claim your wins and deduct your losses.

What is new for claiming gambling winnings on your 2022 taxes?

Claiming your gambling winnings on your tax return will not change from previous years — other than the amount you won, of course.

We took a brief look at how to claim your gambling winnings while filing your 2022 taxes.

What is taxable in Michigan?

Throwing money around in a casino rarely seems like an official transaction. Whether you win or lose, the final disposition of your chips can often feel like a stitch in time.

Unfortunately, it’s not. All winnings that you realize in a casino are taxable as income, both on the state and federal levels.

So, you should be reporting those wins on your annual tax returns. Though many people scoff at the notion of reporting cash income to the government, it counts the same as income from a check or direct deposit in the eyes of the IRS.

Failure to report your gambling income could, in theory, land you in hot federal water or with the state of Michigan’s tax office. In practice, those entities are unlikely to audit someone over a few hundred or thousand dollars.

But that doesn’t mean that they can’t or won’t do so.

Also, please take note that non-cash winnings, such as cars, boats, or other objects that you may win at a casino, are subject to taxes, too. The value that has transferred to you because of the win has increased your financial position, and the government wants its share of the loot. As a side note, game show prize winners have to do the same thing.

What taxes will I have to pay in Michigan?

Now that you’ve steeled yourself to the reality of giving away a portion of your sweet winnings to the government, you may be wondering who and what you’ll be forced to pay. As indicated earlier, you will be compelled to pay percentages to both the IRS and the state of Michigan for your wins there.

The IRS, for its part, will demand that you fork over 25% of your winnings to the feds for your troubles. This rate applies to wins of any size. So even if you win just a dollar, you’ll still need to throw a quarter in the federal direction.

In addition, Michigan law requires that you pay an additional 4.25% to the folks in Lansing for having played in their casino. Even though the casinos themselves are the main wellspring of tax income for the state lawmakers, gamblers do not escape unscathed.

For smaller wins, you’ll essentially be on your honor to report your gambling winnings to the appropriate authorities. As stated earlier, it’s not legal just to stick the money into your pocket, but there’s no mechanism or watchful eye to force your compliance as you exit the casino.

That lack of oversight extends to wins up to $5,000. However, at that point, the casino itself is bound to collect 25% on the government’s behalf before it releases your winnings to you. Give the cage your name and Social Security number, and your tax bill will be settled before you leave the property.

Obviously, losing 25% off the top is a kick in the teeth, but please don’t get any ideas about simply withholding your name and SSN. As it turns out, anyone who refuses to provide their information (for any reason) will be subject to an additional penalty of 3%.

Neither option is good. Bear in mind that the casino is not going to keep a cent of that money that it withholds. So, you might as well go along with it and live to fight another day.

If I never win $5,000, will I ever have to pay taxes upfront?

If you’re not a high roller, the idea of ever reaching the federal threshold for casinos to report wins might seem far-fetched. After all, if you usually bet in $5 or $10 increments, it’s quite unlikely that you’ll realize a win that exceeds $100, let alone $5,000.

So, you may be wondering if you’d ever have to worry about the feds ever knowing that you were gambling. Unfortunately, there are some other scenarios in which the casino might have to report your win to the IRS before handing you the proceeds from your hard-fought victory.

A casino must report a win to the IRS with Form W-2G if any of the following events occurs:

The total winnings, or combined bet and profit, on a slot machine exceed $1,200.
A player’s keno profit on a game is more than $1,500.
A poker player wins more than $5,000 in a tournament.
A game’s profit is more than $600 and is 30 times or greater than the bet amount.

Now, filing this form does not mean that the casino has to collect from your winnings automatically. However, since the government will soon be aware of your win, it would be foolish to omit it from your return. So, make sure to keep your copy of the form for your records.

The bottom line is that if you have a memorable win in a casino, it’s quite likely that the government wants to remember it, too.

How do I report my winnings?

It’s understandable that you might feel disappointed about having to pay taxes on your winnings. Nevertheless, in most cases, you’ll bite the bullet and decide to file. So, here’s how to do that.

As is the case for essentially anything to do with the IRS, there are forms to fill out. The first thing to do is report the income on the IRS Schedule 1, which is the form for additional income and adjustments to income.

On that form, look for Line 8 in Part I, which is entitled “other income.” Here is where you will list your winnings and their source. “Gambling” or “casino” are fine for explaining from where the money came in most cases, although you can be more specific regarding the casino and date if you’re worried about attracting attention.

Once you’ve entered the information onto your Schedule 1, you’ll need to put the same total onto line 7a of your regular tax return. You will then be able to add the winnings into your overall taxable income.

By the way, your Schedule 1 is also the place to list various types of deductions, such as certain business expenses or student loan interest payments. So, make sure that you don’t miss out on all the different ways to knock down that taxable base.

Can I report gambling losses in any way?

Of course, gambling comes with the inherent chance of losing. However, you could understandably think that it seems unfair that the IRS only cares about your winnings. You may wonder if there’s a way to claim gambling losses on your taxes.

As it turns out, you can.

The IRS provides Schedule A as a form to claim various deductions. Although there’s no line expressly for gambling losses, you can list your setbacks in Box 16 — Other Itemized Deductions to claim them.

Now, there are two rules that go along with claiming casino losses on your tax form. The first, and most important, is that you cannot claim losses in excess of your claimed winnings.

So, if you list $1,000 in gambling winnings on your Schedule 1, the maximum that you could claim as losses on your Schedule A would be $1,000. If you had a bad year at the casino (as many of us do), the IRS does not simply allow you to write off the loss as a deduction against your taxable base, unfortunately.

The other rule is that you must be able to prove your losses in some kind of meaningful way in order to claim them. It is vital that you keep records, receipts and other documentation to show the losses, or the IRS might not accept the deduction as valid.

After all, that might be a handy way to offset your winnings from the year and avoid taxation, so the IRS has to be sure that you took the beating you claim to have suffered. The chance that the agency will take a harder look at you will increase as the dollar amount goes up, so if you’re a bit of a high roller, it’s a good idea to keep a paper trail for yourself.

If you’re thinking that record-keeping might be a pain, you can possibly make things easier by using your loyalty or membership card at your casino of choice when you play. Because they award you based on your play, they keep records of your play. It shouldn’t be too difficult to acquire a copy of your history from the casino.

For your Michigan tax return, you can now claim losses as a deductible expense. That change was passed by the state’s legislature late in December 2021, then signed by Gov. Gretchen Whitmer at the close of the year.

Do I have to pay taxes if I don’t live in Michigan?

It’s pretty clear that you have to pay taxes to Michigan if you’re a Michigan resident. However, you may be wondering if you’re still on the hook for the taxes if you’re just visiting from out of state.

Unfortunately, you are still bound to pay taxes to Michigan for your gambling win as a nonresident. As is often the case, there’s even a form for that. Worse yet, you will also have to report your winnings on your return for your own state, assuming that your state requires an income tax.

However, there are a couple of bits of good news. First of all, the states nearest Michigan (Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin) have reciprocal agreements with the Great Lakes State regarding earnings that you incur in Michigan. If you live in one of those six states, you are not required to file a nonresident return in Michigan.

The other ray of sunshine is that there is, in fact, a tax credit that you will be able to claim on your home state’s return that will offset the taxes you paid in Michigan on your winnings. So, even though you had to fork over to a state in which you don’t live, you don’t have to pay double tax on the windfall. Although states are happy to collect tax revenue, they correctly realize that having to pay tax twice on the same win might lead citizens to decide it’s not worth the effort to play.

Do I have to pay taxes if I’m part of a group?

In many areas, there is strength in numbers, and gambling is no exception. It’s not uncommon for a group of friends to pool their money so that they can roll a bit higher than they would individually. Whether they’re throwing in for a slot machine or on a lottery ticket, groups of people can often find themselves with a claim to a significant amount of winnings.

Unfortunately, taxes remain one of life’s surest things, and group wins are subject to taxation just as much as individual wins. As expected, there is a form (you’re probably saying it with us if you’ve read this far).

If your group of friends scores big, you will need to fill out IRS Form 5754 to report the winnings for tax purposes. One member of the group will have to designate himself or herself as the primary winner, and the other members of the group will have to note the share of the prize that they are claiming. So, if you hit it big with your buddies, you might need a calculator.

Once you’ve got the form filled out, send it to the IRS. If the win occurs at a casino, casino management might want a copy of the form for its own records, too.

Does Michigan Tax Your Retirement Income?

On July 12, 2023 / Michigan Taxes

Live in Michigan? Need Tax Assistance? Call ATS Advisors

What are retirement and pension benefits?

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

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

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

What are Qualified Distributions?

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

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

What Distributions Do Not Qualify for a Subtraction?

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

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

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

Form 1099-R Distribution Codes

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

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

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

Form 1099-R Distribution Codes
Form 1099-R Distribution Codes	Does the code indicate the distribution is eligible for a Michigan retirement and pension subtraction? (Limited based on age and year of birth)
1 – Early distribution, no known exception.	No.
2 – Early distribution, exception applies.	No, unless: Part of a series of mainly equal periodic payments made for the life of the employee or the joint lives of the employee and their beneficiary; Early retirement under the terms of the plan.
3 – Disability.	Yes.
4 – Death.	Yes, for surviving spouse only and only if the decedent would have also qualified for a normal distribution under Distribution Code 7 at the time of death. No, for all other beneficiaries. No , if paid as a death benefit payment made by an employer but not made as part of a pension, profit sharing, or retirement plan.
5 – Prohibited transaction.	No.
6 – Section 1035 exchange. The exchange of life insurance	No.
7 – Normal distribution. normal distribution from a plan, distribution from a traditional IRA, if the participant is at least 59½, Roth conversion if the participant is at least age 59½, distribution from a life insurance, annuity, or endowment contract must be 65 and part of a series of mainly equal periodic payments made for the life of the employee or the joint lives of the employee and their beneficiary.	Yes. Exception: You may not subtract distributions from a plan that: allows the employee to set the amount of compensation to be deferred does not prescribe the retirement age or years of service
8 – Excess contribution plus earnings/excess deferrals (and/or earnings) taxable in 2021.	No.
9 – Cost of current life insurance protection.	No.

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

Recipients born before 1946:

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

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

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

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

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

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

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

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

Recipients born after 1952:

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

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

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

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

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

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

Nontaxable benefits:

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

Surviving Spouse:

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

2021 Pension Deduction Estimator

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

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

Dividends/Interest/Capital Gain Deduction

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

Michigan Lowers 2023 Tax Rate (3 Things To Know)

On July 4, 2023 / Michigan Taxes

Michigan Taxes – Michigan Lowers 2023 Tax Rate

Michigan resident? Need tax help? Contact ATS

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

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

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

State Income Tax Reduction

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

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

Governor Whitmer’s Fiscally Responsible Leadership

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

Michigan Residential Solar Tax Credits

On June 29, 2023 / Michigan Taxes

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

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

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

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

Awesome solar programs in Michigan

Michigan Saves Home Energy Loan Program

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

Michigan solar tax credits and incentive programs

The federal solar tax credit

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

Michigan Residential Solar Tax Credits

AC Tax Credit 2023

On June 14, 2023 / Michigan Taxes

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

5 Michigan Tax Hacks to Save!

On May 30, 2023 / Michigan Taxes

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

On May 16, 2023 / Michigan Taxes

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

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

Michigan Nexus

A person has nexus with Michigan if the person

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

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

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

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

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

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

Michigan LLC Tax Deadline

On April 12, 2023 / Michigan Taxes

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

On April 3, 2023 / Michigan Taxes

Public Act 4 of 2023 – Retirement State Tax Changes

Any Questions? Call ATS Advisors! Michigans trusted tax and financial specialists.

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?

On March 27, 2023 / Michigan 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

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