Dear Neighbor,
The new year means tax season is upon us — this year, however, differs a great deal from previous ones as it is the first year Michigan families and seniors can take advantage of historic tax relief passed by Senate Democrats last March. As you work to file your federal and state income taxes — due by April 15, 2024 — I hope you find the information contained in this newsletter helpful in maximizing your return. Please know my office is available to assist you as you work through this process.
As always, should you ever need assistance communicating with the Treasury department or any other state agency throughout the year, please do not hesitate to reach out to me and my office — we are here to serve you. You can contact me toll-free at (855) 347-8029, by email at SenWBrinks@senate.michigan.gov or through my website online at SenatorBrinks.com.
Sincerely,
Winnie Brinks
State Senator
District 29
Lowering MI Costs
Rising costs, high fuel prices and supply chain issues are making it harder for families to put food on the table and fill up their gas tank. To help change this reality, Senate Democrats finalized the Lowering MI Costs Plan last March — the biggest tax relief initiative Michigan has seen in decades. The plan overhauls the unfair and unpopular retirement tax and expands the Working Families Tax Credit, helping more Michigan families and seniors save money.
Expanding the Working Families Tax Credit
To help alleviate financial hardship for families, Senate Democrats created the Working Families Tax Credit — quintupling Michigan’s match of the federal Earned Income Tax Credit (EITC) from 6% to 30%. Public Act 4 of 2023 will help 700,000 Michiganders who have the hardest time affording the basics save an average of $3,150 per year. The expansion takes effect on February 13, 2024. To qualify for the Michigan EITC, you must already qualify for the federal credit.
In addition to claiming it this tax season, the expanded Michigan EITC is also retroactive to the 2022 tax year (last tax season). Federally eligible individuals who claimed the Michigan EITC on their 2022 taxes received the original 6% credit. After the expansion takes effect, the Michigan Department of Treasury will begin to issue supplemental check payments over a period of 5-6 weeks, to provide eligible taxpayers with the remaining 24% portion of the credit. The Michigan Department of Treasury encourages residents to stay up to date and verify their eligibility at Michigan.gov/taxes.
Repealing the Retirement Tax
Ending the tax on retirees has been a top priority for Democrats for more than a decade. Public Act 4 of 2023 phases out the unfair and unpopular retirement tax over four years, and will put an average of $1,000 back in the pockets of 500,000 households. This legislation provides targeted and equitable relief for retirees, restoring the broken promise of a safe, secure and happy retirement for retirees.
Public police officers and firefighters, county correction officers, state troopers and sergeants will receive the full exemption beginning on February 13, 2024. Michiganders from other professions will have the option to choose the best taxing situation for their retirement benefits, by opting into either the tier structure subtraction or phase-in subtraction until the full repeal takes effect in 2026. You may wish to consult with a qualified tax preparer to ensure you are able to deduct the maximum amount of retirement benefits
Verify Your Tax Credit Eligibility
The Michigan Department of Treasury encourages residents to stay up to date and verify their eligibility by visiting Michigan.gov/taxes.
Free Credit Report
Access your free report at: AnnualCreditReport.com
Michigan Attorney General Dana Nessel is reminding residents that they can access free weekly credit reports from each of the three main credit reporting agencies: Equifax, Experian and TransUnion. The program was initiated in 2020 during the strain that the pandemic placed on people’s personal finances. After two extensions, the program is now permanent.
Credit reports contain the financial and personal data used by businesses and potential creditors to assess an individual’s financial fitness for rentals, house and vehicle financing, insurance or even a job. The approval of your application could be impacted by inaccurate information, and it benefits residents to be knowledgeable about what is in their credit report.
The free weekly credit report can be accessed from AnnualCreditReport.com, the only official site for free credit reports authorized by federal law. Other sites offer free credit reports, though residents should exercise caution and watch for fraudulent sites designed to steal your money or your personal information.
To make a formal complaint, call the Attorney General’s Consumer Protection Division at (517) 335-7599.
TAX TIPS: Keep More of Your State and Federal Tax Returns
Tax season is here, so it’s time to get out your tax documents and file with the state and federal governments before the national deadline on Monday, April 15, 2024. Here are tips on how to take advantage of some of the most common tax deductions while staying clear of common scams that target people during the early parts of the year.
For federal returns, the IRS’ official website is IRS.gov, and they will only reach out to you through regular mail delivered by the U.S. Postal Service. The Michigan Department of Treasury’s official website is Michigan.gov/treasury, but they also have a dedicated tax page at Michigan.gov/taxes. Visit IRS.gov for more information and to learn additional ways to protect yourself from tax scams.
Understand Refund Timing
The IRS processed more than 90 million tax returns last year. Nevertheless, they are very efficient at turning returns and payments around in 21 days for those who file electronically. If you mail in a paper return, the IRS has warned it can take as long as six months or more to process. However you file, you can check the status of your refund through the “Where’s My Refund?” page on the IRS website.
Visit IRS.gov/refunds for more details
Deductions reduce the amount of your taxable income. In general, individuals not in a trade or business or an activity for profit, may take a standard deduction or itemize their deductions.
The standard deduction is a flat amount based on your filing status (single; married filing separately; married filing jointly; head of household; or qualifying surviving spouse). You should itemize deductions if the total amount of your allowable itemized deductions is greater than your standard deduction or if you must itemize deductions because you can’t use the standard deduction.
For those who choose to itemize, here are some potential deductions:
Charitable Contributions
In most cases, you can claim the full amount you give to an IRS-qualified organization as an itemized deduction on your federal taxes. Since 2012, however, credits for certain donations are no longer available on your Michigan tax return. Be sure to check with IRS.gov or your tax preparer, if applicable.
Home Ownership
Costs such as property taxes and points paid to get a lower home loan interest rate are deductible, as is interest on home equity loans up to a certain threshold. Your deduction is generally limited if all mortgages used to buy, construct or improve your first home (and second home, if applicable) total $750,000. Mortgages that existed before December 14, 2017, will continue to receive the same tax treatment as under the old rules.
Medical Expenses and Other Deductions
Medical costs — including costs associated with preventative care, surgeries, dental, vision, psychologist visits, hearing aids and more — that exceed 7.5% of your federal adjusted gross income may be claimed on your taxes. Be sure to include them as itemized deductions. You may also qualify for deductions from student loan interest, child and dependent care, mortgage interest and more. To learn more details, visit IRS.gov/credits-deductions.
Small Business Expenses
Generally, most types of business insurance, the cost of utilities, rent payments, expenses related to the purchase and upkeep of company-owned vehicles, office supplies and furniture are all tax deductible. For more details visit IRS.gov/credits-deductions/businesses for more details.
Clean Energy Provisions in the Federal Inflation Reduction Act
In August 2022, President Joe Biden signed the federal Inflation Reduction Act into law, which includes nearly two dozen tax provisions designed to save families money on their tax and energy bills and help invest in clean energy, clean vehicles, and a cleaner environment.
Home Clean Electricity Improvements
If you made qualified energy-efficient improvements to your home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200. Some of the qualified improvements include:
- Solar panels for electricity from a local provider.
- Home back-up power battery storage with capacity of 3 kWh or greater.
- Electric or natural gas heat pumps and water heaters; central air conditioners; natural gas, propane or oil water heaters, furnaces or hot water boilers that meet or exceed the specific efficiency tiers established by the Consortium for Energy Efficiency.
- Insulation materials and systems that meet International Energy Conservation Code standards.
- Exterior windows that meet Energy Star’s Most Efficient requirements.
Electric Vehicle Credits
Michiganders who have purchased a new electric vehicle, qualified plug-in EV or fuel cell electric vehicle may qualify for a credit up to $7,500. Please note that eligible vehicles must meet critical mineral and battery component requirements. To qualify, your adjusted gross income either this year or last year must be below the following thresholds to qualify: $300,000 for married couples filing jointly, $225,000 for heads of households or $150,000 for all other filers. For an interactive guide to energy credits available under the Inflation Reduction Act, visit cleanenergy.gov
Federal Assistance With Tax Preparation
The Internal Revenue Service (IRS) has a Free File Program, which lets qualified taxpayers prepare and file federal income tax returns online using tax preparation software. It’s safe, easy and no cost to you. It provides two ways to prepare and file your federal income tax online for free:
Guided Tax Preparation
The guided option provides free online tax preparation and filing at an IRS partner site. Their partners deliver this service at no cost to qualifying taxpayers. Taxpayers whose adjusted gross income (AGI) is $73,000 or less qualify for a free federal tax return.
Free File Fillable Forms
Those whose gross income is greater than $73,000 can take advantage of Free File Fillable Forms — electronic federal tax forms, equivalent to a paper 1040 form. You can learn how to prepare your own tax return using form instructions and IRS publications if needed.
Local Assistance With Tax Preparation
MI Free Tax Help
Eligible Michigan residents across the state can connect with a free tax preparation expert who can help you claim all the tax credits available, at no cost to you, ever. Simply call 2-1-1 on any phone or visit MichiganFreeTaxHelp.org. The website is powered by the Community Economic Development Association of Michigan and the Michigan Economic Impact Coalition. These organizations are committed to improving access to free, high-quality income tax preparation assistance and promoting personal financial stability and asset-building