Michigan Basic Instructions

Part-Year Resident

You are considered a part-year resident of Michigan if, during 2007, you moved your permanent home into or out of Michigan. You must pay Michigan income tax on income you earned, received or accrued while living in Michigan. You must prepare a MI-1040 as well as the Schedule NR (Michigan Nonresident and Part-Year Resident Schedule) to allocate your income to Michigan and other states.

Nonresident

If you are a resident of another state and worked in Michigan during 2006, you are required to file a Michigan income tax return (MI-1040 and Schedule NR) and are required to pay Michigan income tax on salary wages and other employee compensation for work performed in Michigan.

However, Michigan has a reciprocal agreement with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin. The reciprocal agreements exempt nonresidents from income taxes imposed by each state on salaries, wages and other employee compensation. If you are a resident of one of these states, you are not required to pay Michigan income tax on wages earned in Michigan.

In order to claim a refund of any Michigan withholding tax, you must file a MI-1040 along with the Schedule NR even if you are a resident of a reciprocal state.

Out of state students attending a Michigan college or university are considered nonresidents.

If you are a Michigan resident but worked in another state, all of your income is subject to tax, no matter where it is earned, except income earned from out-of-state business activity. A Michigan resident whose income is subject to Michigan tax and the tax of another state may qualify for a non-refundable tax credit on the Michigan income tax return. The non-refundable credit for taxes paid to another state is NOT available for a Michigan resident who earns salaries and wages in a state that has a reciprocal agreement with Michigan.

Homestead Property Tax Credit

Homestead Property Tax Credit is a way the State of Michigan helps you pay some of your property taxes if you are a qualified Michigan homeowner or renter. The credit is based on a comparison between household income and property taxes paid. Homeowners pay property taxes directly and renters pay them indirectly with their rent. The credit is designed to give the greatest property tax relief to senior citizens, disabled or blind persons and disabled veterans as well as the surviving spouse of a veteran. Michigan residents who are not in these groups may also qualify for the credit.

Your homestead is the place where you have your permanent home. You can only have one homestead at a time and you must live there as well as being the owner or renter. College dormitories do not qualify as homesteads.

You may claim a property tax credit if ALL of the following apply:

  • Your homestead (the place where you have your permanent home) is in Michigan.
  • You were a resident of Michigan for at least 6 months during the year.
  • You own or rent and resided in a Michigan homestead on which property taxes were levied.
  • Your household income is less than $82,650.

If you need to enter more detailed information for your home heating credit than is available on the general information screen, click on the tax forms button and then MI and select MI CR.

Home Heating Credit

This credit helps low income families pay their home heating costs. To see if you may claim a credit, answer the following questions:

  • Are you a full-time student who is claimed as a dependent on another person’s income tax return?
  • Did you live in a licensed care facility for the entire year?

If you answered YES to either of these questions, you cannot claim a home heating credit. If you answered NO to both questions, you may claim a credit if:

  • Your homestead is in Michigan,
  • You own or rent the home where you live, and
  • Your income is within the income limits (see chart below).

 

Exemptions (from line 11i)

Standard Allowance

Income Ceiling

0 or 1

$369

$10,529

2

$495

$14,129

3

$620

$17,700

4

$746

$21,300

5

$871

$24,871

6

$997

$28,471

 

+$126 for each exemption over 6

+$3,586 for each exemption over 6

 

You can have only one homestead at a time and you must be the occupant as well as the owner or renter. Your homestead can be a rented apartment or a mobile home on a lot in a mobile home park. A vacation home or income property is not considered your homestead.

If you need to enter more detailed information for your home heating credit than is available on the general information screen, click on the tax forms button and then MI and select MI CR-7.

College Tuition and Fees Credit

A nonrefundable Michigan income tax credit for college tuition and uniformly-required fees paid on behalf of a student is available for 2007. Uniformly required fees are those fees which are paid by all students attending the named college or university. To claim this credit, you must be a permanent resident of Michigan at the time the tuition and fees were paid, have adjusted gross income of $200,000 or less, and file a Michigan Individual Income Tax Return (Form MI-1040) and Schedule CT.

To access Schedule CT, click on the tax forms button and then MI and select Schedule CT.

Reciprocal State Information

Residents of Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin who work in Michigan can claim exemption from withholding for the Michigan income tax. Employers may create their own exemption form or use the line on form MI-W4 for claiming exemption from withholding. Employee should write "Reciprocal Agreement" and the state name on that line.

The reciprocal agreements exempt nonresidents from income taxes imposed by each state on salaries, wages and other employee compensation. If you are a resident of one of these states, you are not required to pay Michigan income tax on wages earned in Michigan. However, you must file a MI-1040 along with the Schedule NR (Michigan Nonresident and Part-Year Resident Schedule) to claim a refund of any Michigan Withholding tax. Out-of-State students attending a Michigan college or university are considered nonresidents.

All non-Michigan residents with gambling winnings from a Michigan casino or horse race track must report their income on the form MI-1040. The reciprocal agreement does not apply to gambling winnings. Prizes won from Michigan casinos or racetracks by a non-resident taxpayer after September 30, 2003 are now subject to Michigan income tax. You must file your Michigan MI-1040 return and report this income as taxable to Michigan.