Michigan Homestead Property Tax Credit

[matto1]

Hello,

My son was a student at University of Michigan most of last year. He turned 24 so is no longer a dependent.

TurboTax is telling me he can take the Homestead Property Tax Credit associated with the apartment he rented in Ann Arbor. Is this true? I'm pretty sure he wasn't eligible so long as I was claiming him as a dependent, It seems like it's rather large, too -- almost a thousand dollars.

[MinhT1]

It depends.

Your son may be eligible for the Michigan Homestead Property Tax credit if he is considered a Michigan resident.

However, this Michigan document says on The College students tab:

College students with permanent homes outside of Michigan are not considered Michigan residents. Therefore, you do not qualify for the homestead property tax credit and should file a MI-1040 as a nonresident.

[matto1]

Thanks.

I'm still a bit confused, though.

My son grew up in Michigan and lived in Michigan full time without interruption from birth until after graduating college. However, he moved to New Mexico in October -- two months after graduation and the termination of his apartment lease. I'm filling out the part-year form because he changed his legal residence when he moved. That is, registered his car in New Mexico, registered to vote, etc.

He had no income in New Mexico, so I suppose I could just fill out the full-year Michigan form?

Anyway, TurboTax has the part-year information, but asks the questions about the apartment as if it's present tense, e.g., "we need to know if you meet the following qualifications: 1) your home is in Michigan (permanent home, the place you plan to return to whenever you go away".
That was true from the time of birth until two months after he stopped living in the apartment, but it's not true since he moved to New Mexico in October.

My answer is "yes," as that was true at the time of the lease. But I'm not 100% sure that's correct.

[AmyC]

To claim the Michigan Homestead Property Tax Credit (MI-1040CR), a person must have been a Michigan resident for at least six months of the tax year. Since your son lived in Michigan (10 months), he may claim the credit.

The part-year MI return is looking just at the time there. MI is "yes" because it was true at the time of the lease, Well done. MI considers 23% of rent paid equal to property tax. Student income with high property tax credit is reasonable. Beware:

• a part-year return will annualize the income and may reduce the credit
• university housing is not eligible

You probably want to file the MI part year just to let MI know he has officially moved. 

Since he did all of the resident establishing requirements, he will need to file a part-year NM return. There won't be a tax liability with zero income but the way the tax is calculated and the requirement to file is different.

• NM creates a tax liability based from federal income. One day resident plus required to file federal = filing NM.
• NM multiplies the NM % of income earned times the tax liability. In your son's case, 0% x tax liability = $0 tax

[matto1]

Thanks.

I have a question, still: I hadn't downloaded or filled out New Mexico since he has no income there. But you wrote, "NM creates a tax liability based from federal income. One day resident plus required to file federal = filing NM." Do I understand correctly that, if I'm using TurboTax, I have to download the NM form, and file with NM as well? Just asking as neither of those items are free to me, and I'd have just as soon avoided the expense of the download and filing. But if that's what I need to do, I'll do it.

wrt the apartment: Not university housing, owned by an individual and managed through one of the large Ann Arbor property management firms. I also filled out the part year resident form and it already called out the day he left the apartment and then the day he resettled in New Mexico. So I think that part is good now.