Michigan's Tax Reform Act of 2011 . . .

How Does Michigan's New Tax Reform
Affect You?

Major tax reform in Michigan is here! On May 25th, Governor Snyder signed an eight-bill package making sweeping changes to Michigan’s individual and business tax systems. The reforms, effective January 1, 2012, will result in a net business tax cut of $1.7 billion in the first full year of implementation, and a $1.5 billion increase in individual income tax collections.

Seniors are hit hard by the changes. Starting next year, exemptions for pension and retirement plans are phased out. In addition, the $2,300 exemption for individuals age 65 and older is eliminated and so is the exemption for dividends, interest, and capital gains for seniors born after 1945. The chart on the back illustrates the changes for Michigan taxpayers based on their age.

Other changes include the phase-out of the $3,700 personal exemption for single filers with "household resources" starting at $75,000 and joint filers starting at $150,000. The Homestead Property Tax Credit will no longer be available if the taxable value of your homestead is greater than $135,000, or your total household resources are greater than $50,000. The individual income tax rate remains at 4.35% until January 1, 2013, at which time it is permanently reduced to 4.25%.
 

Deductions Eliminated Include

Credits Eliminated Include
  • Child deduction
  • Political contributions
  • Prizes won from bingo, raffle or charity games
  • Certain distributions from IRAs used to pay higher education expenses
  • Distributions from a retirement plan contributed to a charitable organization
  • City income tax credit
  • Public contributions credit
  • Community foundations credit
  • Homeless shelter/food bank credit
  • College tuition and fees credit
  • Earned income credit
  • Vehicle donation credit


The Michigan Business Tax (MBT) will be replaced by a Corporate Income Tax (CIT) that applies only to businesses organized as C corporations for federal income tax purposes. The CIT imposes a 6% tax on net income (with some adjustments) and allows only one credit—the Small Business Credit.

Starting next year, there will be no Michigan filing requirement for business entities that are not C cor-porations, and C corporations that have apportioned gross receipts of less than $350,000. It’s estimated that nearly 100,000 businesses will no longer have to file returns. Businesses taxed as partnerships, S corporations and sole proprietorships will continue to be taxed on the owner’s individual income tax return.

FREE CONFIDENTIAL CONSULTATION

If you are planning for or suddenly find yourself in one or more of these situations, please contact us for a free confidential discussion to see if a business valuation is needed or required.

Steve's Partner Stores & Info Center
2855 44th Street SW Suite 160
Grandville, MI, 49418
Phone: 616.443.2622
 info@Steve's Partner Stores & Info Center .com

 

Disclaimer of Liability

Our firm provides the information in our electronic-newsletters for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein and throughout the Fan page should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in our electronic-newsletters are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.