New Term In Michigan Income Tax – “Total Household Resources”
The term “Total Household Resources” was created by the Michigan legislature in the Michigan Tax Reform MBT repeal and Replacement Act which takes effect January 1, 2012.
Under the old law there was a computation called “Total Household Income” that was used to limit the property tax credit. It basically measures the income of the taxpayer or taxpayers if filing married.
Total Household Resources is determined as follows;
All income received by all persons of a household in a tax year while members of a household,
+ any net business loss after netting all business income and loss,
+ any rental loss or royalty loss,
+ any deduction from federal adjusted gross income for carryback or carryforward of a net operating loss.
Income is defined as the sum of federal adjusted gross income plus all income specifically excluded or exempt from the computation of federal adjusted gross income. It is important to note that Total Household Resources excludes losses from business, rentals and royalties, and also excludes net operating losses.
Income does not include:
- The first $300 of gifts in cash or kind from nongovernmental sources
- The first $300 received from awards, prizes, lottery, bingo, or other gambling
- Surplus foods
- Relief in kind supplied by a governmental agency
- Payments or credits under this part
- A governmental grant that has to be used by the claimant for rehabilitation of the claimant’s homestead
- Stipend received by a person 60 years of age or older who is acting as a foster grandparent under the foster grandparent program
- Amounts deducted from monthly social security or railroad retirement benefits for Medicare premiums
- Energy assistance grants and energy assistance tax credits
Additionally, the incomes of non immediate family members living in your house are added to your Total Household Resources. Examples include:
– Your children and or grandchildren
– Your parents
– Your brothers and sisters
– Your friends
– Your significant other
The income from these other people may have a significant impact on your Total Household Resources. You might say so what! So what, Total Household Resources has the impact of limiting or eliminating the property tax credit on your Michigan State income tax return.
The changes to the homestead property tax credit are as follows:
– Available only for homes with taxable value of less than $135,000.
– For senior claimants: Full credit of 100% if Total Household Resources are $21,000 or less and reduced by 4% for each additional $1,000 in Total Household Resources until $30,000 is reached. For Total Household Resources of $30,000 to $41,000 senior claimants receive 60% of the credit.
– All other claimants are eligible for 60% of the tax credit.
– Credit phase out begins at $41,000 of Total Household Resources and is reduced by 10% for each $1,000 increase. Complete phase-out at $50,000 of Total Household Resources.
If you have any questions on how this may affect your Michigan income taxes, please call your ShindelRock tax professional to discuss the impact these changes might have to your 2012 income tax return.