Can a full time dependent student claim the MI homestead property tax credit on off-campus housing rental?

[ddv_world]

This has to be a common situation:  Full time student, dependent on parent's return, worked so had some income for the year, renting an apartment (it is not in school housing), and paying for heat separately.  Parents live in own home in MI, where student would otherwise live if not living on-campus or near the "away" school in MI.  Combined, we are paying a small fortune in off-campus (private) apartment rent & utilities at a couple MI college towns, so it certainly would be nice if there were some recovery, even if only a few hundred dollars.

[Belling]

Unfortunately, no. The only way for your son/daughter to be able to claim the MI Homestead Property Tax Credit for this off-campus apartment, would be if your child filed his/her own return independently. 

Below I have included a link to Michigan's Department of Treasury Website- specifically the section on eligibility for the Homestead Property Tax credit. 

http://www.michigan.gov/taxes/0,1607,7-238-43535_43538---,00.html

[ddv_world]

Thank you for your reply; However, I disagree after reading the details of the MI instructions, in that the there is no mention that eligibility for the MI Homestead Property Tax (HPT) credit requires that you NOT be a dependent on another taxpayer's return.

While that little detail is actually singled out for the MI Home Heating Credit, it is not for the HPT Credit.  In fact the filer can be a dependent on another return for the MI HPT Credit eligibility, however the total "household resources" (MI 1040 line #24) must of course include the amount that the parent provided to the student that allows them to be considered a dependent (i.e. over 50% of the dependent student's total household resources).  

Because the off-campus apartment is being leased in the student's name for the full 12 month year (i.e. under contract), and the student pays the rent (receipts saved), it appears that the student qualifies.  It seems that since the student plans will continue to rent 12 month leases to finish college, it becomes "the place the student returns to from being away" per MI definition, so the apartment nearby the university has essentially become the student's permanent home or "domicile", based upon the definition for the purposes of MI tax code.  The is no indication that a MI resident who is a dependent college student, cannot consider their off-campus apartment their domicile / permanent home for MI tax code.  The dependent student's MI return therefore would need to use the student's apartment address.  

With respect to the student qualifying as a dependent under the FEDERAL tax code to count as an exemption on Fed 1040 (and therefore as an exemption on the MI return), the federal instructions indicate a child, of age 24 or less, who is absent due to the special circumstance of "education", still qualifies as being a member of the parent's household, and counts as a dependent exemption when receiving more than half of support from the parent.  The dependent student's FED return therefore would need to use the parent's address.  

If I am mis-interpreting or missing a tax rule somewhere that disqualifies eligibility for the MI HPT Credit for the situation that I have presented, it would be great if someone who is very familiar with MI tax code & returns could explain the fault... There must be many other parent & student taxpayers in this exact situation either already filing for the credit, or wanting to if it is allowed.

[ddv_world]

Further review of the MI instructions and the MI-1040CR form shows that the rented housing address(es) for which the credit is being claimed are to be listed on the form at line #52, so the MI-1040 form header and the MI1040CR form header can show the same address as the Fed 1040 form (same as the parents address), not necessarily the rented housing address.  IS ANYONE READING THIS AWARE OF a MI tax rule that flat-out won't allow a MI Homestead Property Tax Credit for a student who is a dependent on another Federal filer's return, with well less than $50,000 of total household resources per MI rules, and is paying monthly rent in their own name on year-round lease of a non-government, non-subsidized private housing apartment???  I see nothing shooting this credit down in this situation.  THANKS in advance for your help.

[ddv_world]

Another item supporting item:  Visit the MI Treasury website and type question "May I claim a homestead property tax credit if I am a college student?" to get this official answer => <a rel="nofollow" target="_blank" href="http://www.michigan.gov/taxes/0,4676,7-238-43715-153664--,00.html">http://www.michigan.gov/taxes/0,4... pivotal item comes down to deciding what location the student considers their "permanent" MI residence to be, i.e. their parent's MI home, or their MI apartment.  In our case, the student works part-time at various jobs (including 1099-MISC income for a self-employed situation), while attending college full time, living in a 12 month leased apartment (i.e. year-round, not just fall & winter semesters).  It seems that in this situation the student can justifiably call "the place to which you plan to return whenever you go away" to be the apartment for the state of MI's definition of a "permanent home".  He/she is "away" at college, but now locates their rented living quarters there, working in the community, and from a state of MI tax law standpoint, intending to stay there unless he/she lands a bigger job elsewhere, post-graduation. Student's federal return gets the parent's home address per the fed's handling of a dependent college student; while the student's MI return gets the current apartment address per the above explanation.  IS ANYONE READING THIS AWARE OF any MI tax rule(s) that is in conflict with this?  THANKS in advance for your help.

[bkrause]

Yes, dependents may still be eligible to claim the homestead property credit.  MCL §§ 206.508(3); 206.520.  For the full list of rules pertaining to this credit, see MCL §§ 206.501 - 206.532 linked below.  Be careful to compute household resources properly, which will include gifts from family members.  MCL § 206.508(4); RAB 2015-18.

<a rel="nofollow" target="_blank" href="http://www.legislature.mi.gov/(S(dyms510dz4khtto1wdgx31qg))/mileg.aspx?page=getObject&objectName=mcl...>

RAB 2015-18 is here:

<a rel="nofollow" target="_blank" href="http://www.michigan.gov/documents/taxes/RAB_2015-18_Income_Tax-Household_Resources_Defined_502159_7....>

The above comment from turbotaxbelling should be removed from this website (along with tons of other questionable responses to peoples' tax questions, imho, but you get what you pay for).

You're welcome,

Brendon Krause, CPA

[DanHe]

I've submitted for both my children the Michigan tax and claimed the MI homestead property. I received a letter from Michigan Department of State that the claim was denied, and my children where only paid back few dollars of return and not the credit. I support more than 50% of their expenses, but I have my kids work and pay their rent. This is very frustrating that Turbotax doesn't recognize this as a problem and does not let you know that this is wrong, if it is wrong. Or is frustrating that Michigan does not recognize that children can still work and get paid enough to cover for their rent. And they should be reimbursed the credit.

FYI I am now filling a worksheet for determining support form 4622. Maybe this will help or who knows, now my kids will have to pay taxes on the money I provided them for tuition and food and clothing.

The story continues.

[zg1212]

By reading MI instruction, dependent student should be able to claim HPT credit. But it might be easier to claim it in the student's tax return than in the parents' tax return. And adding parent support amount into student income might get complicate.