If I qualify for the Michigan Homestead Property Tax Credit but TurboTax says I don't, what are my options for correcting my return before I submit it (TY2020)?

[xbe8zzuus]

Specifics:
- I am a homeowner with a taxable value of $74490 (less than the $135000)
- THR calculated from Michigan 1040CR checklist of $45407 (less than $60k)
- Paid $3061 in property taxes
- Was a part time resident in Michigan for 197 days (>50% of year or 6 months)
- Prorated my property taxes are $1647 via MI1040CR Part 3
- Going through the rest of the math including the 3.2% multiplier for line 34 and 60% multiplier in Part 1, Section C - my calculations show I can claim $117 of credit additionally to my Michigan taxes

I spent some time on the phone with Justin H from TurboTax today and he could not figure out why the software is saying I don't qualify. I am inputting everything as I should according to Justin and we fiddled with all the numbers including fake figures and could not get the software to accept anything to be eligible. At this point, I already have the MI1040CR form filled out and am reasonably confident I should be owed this credit.

Can anyone sanity check me or my math and see if this is indeed the case? If so, how can I go about adding the credit and extra form to my return before I file? Lmk if you need more info...Thanks!

[xbe8zzuus]

@JotikaT2  and @KathrynG3  have been helpful to people in the past with this issue and I was wondering if they may be of service here?

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These are the state of Michigan tax forms and resources I am using:

MI1040CR: https://www.michigan.gov/documents/taxes/MI-1040CR_711858_7.pdf

Instructions: https://www.michigan.gov/documents/taxes/MI-1040CR_Property_Tax_Credit_Instructions_712106_7.pdf

THR checklist: https://www.michigan.gov/documents/taxes/ChecklistDetermineTHR_444822_7.pdf

Side note- why is this so complicated :(

[KathrynG3]

Yes, calculating the credit is definitely more complicated now and the eligibility requirements are more stringent than in the past.

Regarding your situation, be sure to reduce the Homestead Property Tax Credit itself by the percentage of days present in Michigan, too. 

Check the total household resources are listed at $45,407 on Line 28 of Form MI-1040CR. Check the dates listed and how the properties owned are entered to make sure the allocation is correct.

This would have included additional household resources as seen in the screenshot below.

After entering No to Live in the same place all year?, the next screen is Enter Property Tax Information. There is a note to enter 100% of the annual property tax for each residence, but only enter the Michigan property. 

At Enter Home Address, verify that the addresses of residence are correct so that TurboTax will know what to allocate. 

[Edited 04/10/2021 | 10:03 AM PST]

@xbe8zzuus

[xbe8zzuus]

Thank you so much for your reply!!!

Please check my understanding: The reduction in Homestead Property Tax Credit for part year residents applies to the maximum benefit possible. So If I lived in MI 54% of the time, I would qualify for a maximum of 54% of the maximum $1,500 credit. From the MI1040CR instructions:

As far as income being annualized, I dont see that anywhere in the instructions for the form.   However, in the state tax filing section, the only place it asks about wages is below- would it be trying to annualize from this? Is there any way to stop that if so?

In regards to my THR, as directed by the checklist and instructions for MI1040CR, I subtracted my household (married filing jointly) health insurance premiums (box 31) from my wages/salaries/etc subtotal (box 28) to get the $45,407 (box 33). The screenshot of household resources that the TurboTax online software takes me through is the same as the checklist I linked above.

Here are screenshots of the portions of MI1040CR that I have filled out, maybe something will jump out to you that I have gotten wrong? Any help is appreciated- I want to get this filed!!!

[xbe8zzuus]

Forgot to answer the last part of your post: so that is how I have been filling it out on TurboTax this whole time unfortunately since my last residence I was renting.

And the next screen does indeed have my address correct.

[KathrynG3]

You're welcome and thank you for your patience. I did not see your reply until today.

1. Yes, you are correct regarding the 54% of the Homestead Property Tax Credit.

2. No, this section for Michigan wages is not for annualizing income, it is for allocating it. In other words, it is asking where the income was earned to determine if Michigan is entitled to tax it. If you did not earn the wages inside Michigan, it should not be included.

The second part is also determining whether the rate of tax should be resident or nonresident. Answer according to your dates of residency.

Regarding the allocation in the last question under Enter Property Tax Allocation, if the details from the rental are captured. Otherwise, you may try entering 0 under Old Home: Annual Property Tax.

@xbe8zzuus

[xbe8zzuus]

@KathrynG3 

I tried many different combinations of numbers, including entering 0 for the “old home”, and the software still says I’m not eligible for the tax credit.

I spent about a while on the phone with someone from TurboTax trying to figure it out to no avail. On this call, we even tried putting changing my residency status overall in the software to be a full time Michigan resident and inputting fake numbers for all of my Michigan return that meet all the eligibility requirements for the credit and it still doesn’t work. The best solution Justin H had for me was to fill out my taxes by hand and mail them in.

Unfortunately, city taxes are due today (since the deadline wasn’t pushed back) and are supposed to be filed with state taxes so I am about out of time. I am disappointed with the TurboTax deluxe software and the support I have been getting for the amount I have paid. Is there any way to manually override the software to get it to say I’m eligible? Is there another level of support that I can get besides having to pay +$100 for a real person to do my taxes from TurboTax now or do I need to file my taxes by hand and ask for a refund?

[KathrynG3]

Thank you for the feedback and patience throughout this process. Before you do that, could I take one last look at it? 

If yes, I will need your TurboTax ".tax2020" file as a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions:

For TurboTax Desktop:

• On your menu bar at the very top, click "Online"
• Send Tax File to Agent click Send.
• The pop-up will have a token number.

I'll be able to open TurboTax with your numbers but not your personal information. That may help diagnose the issue.

@xbe8zzuus

[xbe8zzuus]

@KathrynG3 

Thanks for offering to do this. How do I do this with the online software? Will you be able to get back to me today?

[KathrynG3]

Yes, definitely I will get back to you today.

For TurboTax Online:

• From the left menu, click Tax Tools.
• Tools.
• Share my file with agent click Send.
• There will be a pop-up with a token number. 

This number is safe to post publicly. It is unusable by anyone but us.

[Edited 04/15/2021 | 10:14 AM PST]

@xbe8zzuus

[xbe8zzuus]

@KathrynG3 

Is there a way for me to direct message you my token or is it safe for me to post publicly?

[xbe8zzuus]

@KathrynG3 

Here is my token number. Thank you for your continued help!
822199

[KathrynG3 · Accepted solution]

Thank you! I have reviewed the file.

Unfortunately, the credit is not available in your case. The calculation is correct and even a reduced portion of the Homestead Property Tax Credit cannot be claimed.

The explanation is that Total Household Resources for part-year residents must annualize the income. This is why there is not anywhere to adjust this outcome in TurboTax since the annualizing result exceeds $60,000. 

This calculation applies only for Total Household Resources, and does not capture actual earnings. Likewise, if a household included dependents who made money, their earnings would be included in the Homestead Property Tax Credit determination, even though dependent income would not even be on the return in question.

To annualize the income, take income reported multiplied by 366 divided by the number of days present in Michigan. This, in effect, increases the income because the fraction is greater than 1.

See Property Tax Credit MI-1040CR Instructions, page 4, column two.

@xbe8zzuus

[xbe8zzuus]

Ah ok finally! Of course I missed that part. Hopefully people in this same, very specific situation can learn from this haha!

I wish there was a a little bit more explanation of why I don't qualify instead of a mostly blank screen saying that I'm not eligible and that's it. Thank you so much for checking over all of that for me!