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Q&A: Sweeping changes with homestead tax credit, pension plans

Q&A: Sweeping changes with homestead tax credit, pension plans. DAWSON BELL DETROIT FREE PRESS LANSING BUREAU. http://www.freep.com/article/20110414/NEWS06/104140497/1008/NEWS06/Q-Sweeping-changes-homestead-tax-credit-pension-plans. Governor and GOP.

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Q&A: Sweeping changes with homestead tax credit, pension plans

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  1. Q&A: Sweeping changes with homestead tax credit, pension plans DAWSON BELLDETROIT FREE PRESS LANSING BUREAU http://www.freep.com/article/20110414/NEWS06/104140497/1008/NEWS06/Q-Sweeping-changes-homestead-tax-credit-pension-plans

  2. Governor and GOP • For the second time in two months, Gov. Rick Snyder unveiled a proposal for sweeping change in the way Michigan collects taxes. This time it was to announce that he, along with Republican leaders in the Legislature, had agreed to changes in his original pension tax plan and in the structure of the homestead property tax credit. • The new proposal Tuesday prompted a flurry of new questions from readers, a few of the most frequently asked are addressed below.

  3. What happens to the homestead property tax credit? • ANSWER: Under current law, homeowners can claim an income tax credit up to $1,200 (regardless of whether they owe any income tax), when their property taxes exceed 3.5% of their household income. Seniors can get 100% of the amount in excess of 3.5%; others are limited to 60%. The credit is phased out for those with incomes between $73,650 and $82,650. • The plan announced Tuesday would provide the 100% credit only for those with incomes under $20,000. The size of the credit would be stepped down for those with incomes above $20,000 and zeroed out at $50,000. It would remain capped at $1,200. Owners of homes valued at more than $200,000 would no longer be eligible, and claims would be limited for some homeowners who take losses on their income tax returns for business activity.

  4. Would retirees w/ pension income but no SS have to pay income tax on entire pensions? • A: Mostly no. For those 67 years and older, the new plan calls for no tax on public employee pensions, which is the same as current law. • For retirees ages 60-66, retirement income, regardless of source, would not be taxed if it is less than $20,000 for a single person and $40,000 for a couple. • Retirees 59 years and younger could use only their personal exemption ($3,700) to shelter pension income from taxation. But when those retirees reach age 67, the $20,000 and $40,000 exemptions for all sources of income would apply.

  5. Hold Harmless • We talked about this earlier. • Appears that most people age > 67 will not be subject to higher taxes. Others will be.

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