Rebuilding the Michigan Homestead Property Tax Credit

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Governor Snyder’s proposed Fiscal Year 2015 budget includes $102.7 million for an expansion of the Homestead Property Tax Credit, which was cut in 2011. This will benefit middle-income families, seniors and veterans, in particular.

The HPTC is a refundable credit available to eligible Michigan residents who pay high property taxes or rent in relation to their income. As it stands now the HPTC applies to those with total income under $50,000 and taxable home value beneath $135,000.

For general taxpayers, the credit is equal to 60% of the amount that property taxes (or 20% of rent) exceed 3.5% of income. For filers who are age 65 or older with an income of $21,000 or less, the credit is 100%. For filers who are disabled, the credit is 100%. The maximum credit is $1,200.

In 2011, the HPTC was just one of many credits and exemptions that were reduced in order to offset the elimination of the Michigan Business Tax. The HPTC was taken away from those with income over $50,000 but less than $82,650. This tax shift took effect in tax year 2012, with fewer residents being eligible for the HPTC than in past years.

The governor’s proposed 2015 budget raises the HPTC income threshold to $60,000 and changes the income multiplier from 3.5% to 3%.

If the proposed expansion of the HPTC passes it will be the third change to the HPTC in as many years. The change would affect 1.3 million taxpayers. It would increase HPTC refunds an additional $100 million averaging an increase of $80 per qualified taxpayer. The credit would be retroactive for tax year 2013 but would still fall 27% short of 2011 funding totals. Under the governor’s proposal, with the proposed lower income multiplier and a higher income allowance, more general taxpayers would benefit.

Source: Department of Treasury
Does not include the Farmland Preservation Tax Credit.