by Daryl Thompson, J.D., Hotline Attorney
Are you in a financial pinch? The Michigan Homestead Property Tax Credit may provide you with valuable compensation that you have missed.
The Homestead Property Tax Credit is a Michigan Income Tax form that pays people a portion of their property tax back even if they do not pay any income tax or even if they do not directly pay property tax.
Generally, the credit is calculated as 60% of the amount of property tax that is over 3.5% of a person’s income (measured as total household resources). So if a person were responsible for $800 in property taxes, and 3.5% of the person’s income is $700, then the credit would be 60% of the $100 left over. But for seniors the credit is better (see below).
The Homestead Property Tax Credit is an interesting source of relief because:
- It can be claimed by more than just homeowners. It applies to renters, homeowners, and those living in skilled nursing facilities. So long as the place where you live pays property taxes, even if you do not directly pay the property tax, then you may be eligible for the tax credit.
- Although many types of residences can be qualified towards the credit, some limitations exist. For instance, if you live in a skilled nursing facility, there is a chance the facility does not pay property taxes, in which case you would not be eligible. Another example is that for years 2012 and after, you cannot claim the credit if the taxable value of your home is $135,000 or more (the taxable value can be found on your property tax statement).
- Renters can claim a percentage of their rent as property tax for the purposes of the tax credit. The amount is 20% through 2017 and 23% for 2018 and after.
- If you missed filing for other years, you can still claim back credits. You can file for up to four past years as well as the year for which you are facing original deadlines. For example, the original deadline for filing 2015 income taxes is April 15, 2016. The taxpayer can claim a homestead property tax credit not only for 2015, but also for 2014, 2013, 2012, and 2011. This can add up to quite a bit of money. Of course, filing a claim for back years can only be done if you have not already claimed for that year.
- You can claim the credit even if you did not pay property taxes. The Homestead Property Tax Credit is based on liability. This means that even if you failed to pay your property taxes during a year you can still claim the property tax credit, so long as you are still liable to pay the property taxes. There are some situations where tax liability is reduced or eliminated, in those cases your ability to claim the Homestead Property Tax Credit would also be reduced or eliminated. Examples would include the Poverty Exemption or the Disabled Veterans Exemption.
- Seniors are favored by the credit. The amount of the homestead property tax credit available to seniors (measured as age 65 or over) is even higher than to non-seniors.
- Seniors who have income under $21,000 can qualify for 100% of the amount left over rather than just 60%. Seniors who have income between $21,000 and $30,000 still can claim a greater amount than the 60% based on a sliding scale. It is not until seniors have total household resources more than $30,000 that they suffer the 60% restriction.
- Senior Renters can claim the credit for rent that is more than 40% of their income measured as total household resources. If senior renters are paying more than 40% of their income in rent, they may be eligible for a higher credit than if they were not seniors.
The rules for the tax credit have changed and will change:
- 2011 and before: More people were eligible because the income limits were higher ($82,650 then vs. $50,000 now) and the property taxable value cap did not exist
- 2018 and after: The income limit will be raised, but not as high as it had been in 2011, and the property value cap of $135,000 will also be raised. In 2021, these will be adjusted for inflation on a yearly basis.