Property Taxes Eligible for Credit
Ad valorem property taxes that were levied on your homestead in 2019, including administrative collection fees up to 1 percent of the taxes, can be claimed no matter when you pay them. You may add to your 2019 taxes the amount of property taxes billed in 2019 from a corrected or supplemental tax bill. You must deduct from your 2019 property taxes any refund of property taxes received in 2019 that was a result of a corrected tax bill from a previous year.
Do not include:
•Delinquent property taxes (e.g., 2018 property taxes paid in 2019)
•Penalty and interest on late payments of property tax
•Delinquent water or sewer bills
•Property taxes on cottages or second homes
•Association dues on your property
•Most special assessments for drains, sewers, and roads do not meet specific tests and may not be included. You may include special assessments only if they are levied using a uniform millage rate, are based on taxable value, and are either levied in the entire taxing jurisdiction or they are used to provide police, fire, or advanced life support services and are levied township-wide, except for all or a portion of a village.
NOTE: School operating taxes are generally only levied on the non-homestead portion of the property and may not be included in taxes levied when computing the property tax credit on any portion of the home not used as your homestead.
Home used for business. If you use part of your home for business, you may claim the property taxes on the living area of your homestead, but not the property taxes on the portion used for business. Include a copy of U.S. Form 8829 with your Michigan return.
Owner-occupied duplexes. When both units are equal, you are limited to 50 percent of the tax on both units, after subtracting the school operating taxes from the total taxes billed.
Owner-occupied income property. Apartment building and duplex owners who live in one of the units or single family homeowners who rent a room(s) to a tenant(s) must complete two calculations to figure the tax they can claim and base their credit on the lower amount. First, subtract 23 percent of the rent collected from the tax claimed for credit. Second, reduce the tax claimed for credit by the amount of tax claimed as rental expense on your U.S. Form 1040, Schedule 1. Include a copy of the U.S. Schedule E with your Michigan return.
Farmers. Include farmland taxes in your property tax credit claim if any of the following conditions apply:
•If your gross receipts from farming are greater than your total household resources, you may claim all of your taxes on unoccupied farmland classified as agricultural. Do not include taxes on farmland that is not adjacent or contiguous to your home and that you rent or lease to another person.
•If gross receipts from farming are less than your total household resources and you have lived in your home more than ten years, you may claim the taxes on your home and the farmland adjacent and contiguous to your home.
•If gross receipts from farming are less than your total household resources and you have lived in your home less than ten years, you may claim the taxes on your home and five acres of farmland adjacent and contiguous to your home.
You may not claim rent paid for vacant farmland when computing your property tax credit claim. Farmland owned by a Limited Liability Company (LLC) may not be claimed for a homestead property tax credit by one of the individual members.
Include any farmland preservation tax credit in your total household resources. Enter the amount of credit you received in 2018 on line 20 or include it in net farm income on line 16.
Homestead property tax credits are not included in total household resources. If you included this amount in your taxable farm income, subtract it from total household resources.