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Michigan Retains Personal Exemption For State Income Tax

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On February 28th, 2018, Governor Rick Snyder signed legislation into law that will retain the personal tax exemption for Michigan taxpayers. When President Trump signed the Tax Cuts and Jobs Act of 2017 (the “Act”) into law last December, he enacted federal legislation that suspended personal exemptions in the Internal Revenue Code for tax years beginning after December 31st, 2017 and before January 1st, 2026. Before the Act, the personal exemption that a taxpayer would have been allowed to subtract from his adjusted gross income for the taxpayer, his spouse and any dependents on his 2018 federal return was $4,150.00 each. Michigan’s income tax code also allows for personal exemptions, but the amount and manner that may be deducted in MCL 206.30(2) through MCL 206.30(7) is tied closely to whatever the current federal personal exemption is. Many observers feared that, by operation of the statutory language, the suspension of the federal personal exemption would also suspend the state personal exemption.

The new tax legislation in Michigan not only preserves the state personal exemption, but also accelerates its growth beyond what the federal rate would have allowed prior to suspension. If the Tax Cuts and Jobs Act of 2017 did not go into effect, the federal personal exemption would have reached $4,300.00 by 2021. The Michigan personal exemption will now grow at a rate to reach $4,900.00 by 2021, which is $600.00 higher than originally scheduled. That amounts to a $25.50 tax cut per individual, or $102.00 for a family of four.

Certain Mchigan taxpayers are also eligible for an additional personal exemption amount above the standard amount:

  • An additional $1,800.00 for each taxpayer and every depdendnet of the taxpayer who is a deaf person, a paraplegic, a quadriplegc or a hemiplegic, a blind person or a totally and permanently disabled person.  When a dependent of a taxpayer files a state tax return, a taxpayer or dependent of the taxpayer, but not both, may claim the additional exemption allowed.  MCL 206.30(3)(a).
  • For tax years after 2007, $250.00 for each taxpayer and every dependent of the taxpayer who is a qualified disabled veteran (e.g. has “a service-connected disability”).  When a dependent of a taxpayer files a state tax return, a taxpayer or dependent of the taxpayer, but not both, may claim the additional exemption allowed.  MCL 206.30(3)(b).
  • Taxpayers who are 62 years of age or older will also be entitled to take additional deductions on their tax return depending on their year of birth.  MCL 206.30(9).

If you have additional questions about Michigan income taxes, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC today.

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