Michigan renters are eligible to receive state income tax reductions on the rental fees they paid during the year to their landlords. Their reductions are tax credits -- not tax deductions. Generally, tax credits lead to larger reductions than individual tax deductions. Qualified Michigan renters can take advantage of the state's homestead tax credit typically available to only homeowners in the majority of other states.
Michigan Homestead Property Tax Credit
The Michigan Homestead Property Tax Credit allows taxpayers to reduce their taxes if they meet the state's income and residential eligibility requirements. The Homestead Property Tax Credit is available to Michigan residents who have lived in Michigan for at least six months annually. Homestead residents must use their homestead property as their principal residences. Furthermore, eligible applicants must have annual incomes of less than $82,650, as of 2011.
Michigan homestead residents can own or rent their homestead property, but only one property is available for a homestead tax credit annually. Residents cannot claim their vacation homes or second homes for homestead tax credits. To claim a homestead tax credit, residents use MI-1040CR, Homestead Property Tax Credit form, and file the form with their annual state income tax returns. Michigan income taxes are due at the same time that federal taxes are due. Residents who are not required to file annual state income tax returns can claim a separate tax credit claim.
Michigan renters must verify their rentals by sending a copy of their lease agreements with their MI-1040CR forms. Part-year residents can claim a tax credit only for the amount of time they actually rented their homes. Residents that receive governmental housing benefits or allowances must reduce their credit by the amount of assistance they receive. Under Michigan tax law, college students living in dormitories cannot claim the Homestead Property Tax Credit.
Amount of Tax Credit
The amount of the Michigan Homestead Property Tax Credit is equal to the amount of property taxes that owners or renters pay. Renters who are not required to pay their owners' property taxes as part of their contractual rental obligations cannot claim the credit. Furthermore, the tax credit phases out for those who earn more than $73,650 annually. Residents who earn less than $73,650 annually can receive a 100 percent tax credit on the amount of property taxes they pay per year. Their property tax credits are received as income tax refunds.
- Michigan Department of Treasury: Michigan Homestead Property Tax Credit Claim
- Michigan Department of Treasury: Taxpayer Assistance Manual
- Michigan Department of Treasury: Homestead Property Tax Credit Information
- Michigan Department of Treasury: Michigan MI-1040 Individual Income Tax Forms and Instructions
- Michigan Legislature: Income Tax Act of 1967