I am using TurboTax Online to complete my 2023 federal and state taxes as a part-year resident of Illinois and Michigan. I was resident in Michigan for 275 days in 2023. My question is about the Homestead Credit (form 1040CR). The TurboTax Online interview requests to know my part-year resident status both for overall income tax and homestead credit purposes. Looking at the form and instructions, the correct approach for a part-year resident appears to be pro-rating the property taxes paid based on the days of residency. The instructions for 2023 for 1040CR do NOT say to pro-rate the credit itself once it is calculated based on the pro-rated taxes paid. In the year 2020, the instructions DID state to pro-rate the credit itself, however this has changed starting in 2021. The 2020 form had a section called "Maximum Credit Limit for Deceased Taxpayers and Part-year Residents," while the same section in 2023 is called only "Maximum Credit for Deceased Taxpayers." The 2020 instructions include an example for a part-year resident, for whom the maximum credit is pro-rated. The 2023 instructions do NOT contain this example.
2020 instructions:https://www.michigan.gov/-/media/Project/Websites/taxes/Forms/2020/2020-IIT-Forms/MI-1040CR_Property...
2023 instructions:https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/2023/2023-IIT-Forms/MI-1040CR-In...
I believe TurboTax is erroneously pro-rating my credit in line 44. My line 42 amount is $1700 (the maximum for 2023), my line 43 is 100%, and my line 44 is $1276, which is 75% of $1700, I believe based on my part-year residency.
Does anyone have any guidance on this? The instructions in 2020 appear to double-pro-rate a part-year resident: the taxes on which the credit is based are pro-rated, and then the credit itself is pro-rated. It looks like Michigan corrected this in 2021 and going forward to only pro-rate once, at the step where taxes are pro-rated in Part 3 of the form. But TurboTax is maybe using the old instructions?
