Michigan Income Tax – Changes to the Pension Exclusion

Taxpayers will be classified into one of three categories :

  • Born before 1946- same treatment of retirement and Social Security income as in prior law.
  • Born 1946 – 1952 may take an exemption of $20,000 for a single return and $40,000 for a joint return against retirement income until age 67 when they may take that same exemption amount against all types of income.
  • Born after 1952 – no exemption for retirement income until age 67, except for the Social Security.  At 67,

(1)              the taxpayer has a choice between the $20,000/40,000 exemption against all types of income, with no personal exemptions and with no additional exemption for Social Security
or

(2)              continuing the exemption for Social Security, along with the personal exemptions for which they are eligible.

The $20,000/$40,000 exemption is not available when total household resources exceed $75,000 single $150,000 MFJ.

homestead property tax credit – more or less

Less for some, more for others !

…set a household income cap of $50,000 for claiming the credit, down from $82,650 currently and $70,000 under the original plan Gov. Rick Snyder presented Feb. 17…

Those with household incomes of $20,000 or less will be eligible for 100 percent tax credits, compared with 60 percent currently and 80 percent under Snyder’s February proposal, which was revenue-neutral.

“What we’re trying to do is beef up the support to moderate- and low-income families,” said Lt. Gov. Brian Calley, Snyder’s point man on tax issues.

Dave Maluchnik, a spokesman for the Michigan Catholic Conference, which advocates for the poor, called the shift “a step in the right direction.”

more from this story

Additional related links:

http://www.taxfoundation.org/news/show/27104.html

Budget deal – MI personal income taxes

The new proposal would exempt those aged 67 and older from the pension tax, Snyder said. For people 60 to 66 years old, the first $20,000 would be exempt for an individual and the first $40,000 for a couple. Pensions would be taxed at the full rate for retirees aged 59 and younger.

But once any Michigan resident turns 67, income exemptions of $20,000 for individuals and $40,000 for couples would apply, Snyder said.

…….

The revised budget plan also makes further cuts to the Homestead Property Tax Credit, though the credit would be strengthened for those with incomes of $20,000 or less. …….. more

The Most Tax-Efficient Man in America

Wall Street Journal consistently turns our quality finance articles, this no exception….

In general, people who are employees and have side businesses are often in the best position to maximize the tax code’s benefits, say experts. Mr. Stives calls this “the best of all worlds.”

…Tax rules allow him to work for only three days of a 11-day trip and write off the airfare and a majority of other costs, he says. “To deduct the airfare, you have to spend more than half your working days on business, but travel days don’t count, and neither do weekend days you wouldn’t work anyway,” says Mr. Stives. “So I can leave on a Friday, teach for three days midweek, and return the following Monday.”

….”The most important lesson I teach my students,” he says, “is that just because something is deductible, that doesn’t make it free.”   more

 

IRS Ramps Up Mail Tax Audits

You’re now almost four times as likely to conduct your tax audit by mail, as you are to sit down with the tax man.

Of the more than 1.6 million Americans who were slapped with audits last year, 78% dealt with correspondence audits, while only 22% were asked to come in for an in-person examination.

That is a 13% rise in audits-by-mail from 2009, and a 93% jump compared to 2003. In 2000, the chances of getting a correspondence audit were less than 2 to 1.   more

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