Question:
Will I pay more taxes to the State of Michigan because of the new federal tax legislation?
Answer:
You could have, but Governor Snyder passed bills on February 28, 2018 that eliminated the consequences of the federal tax plan. Here’s how it works.
Many state income tax laws are influenced by changes made to the federal income tax code. If state legislators don’t make changes to their state’s tax code to offset the federal changes, the state could receive more income taxes.
The new federal income tax law eliminated personal exemptions in favor of larger standard deductions.
Previously, Michigan taxpayers could claim the personal exemptions on their state income tax return which reduced their income tax liability. Now that it’s eliminated, they can’t, and the State of Michigan would have received an annual $1.5 billion tax increase.
But, Governor Snyder passed legislation allowing Michigan taxpayers to claim a $4,050 exemption for themselves and each of their dependents, regardless of the number of exemptions claimed on their federal income tax return.
This exemption is set to increase every year, up to $4,900 per exemption in 2021.
The Michigan City Income Tax was also amended to allow city residents to continue to claim personal exemptions.
Have questions about state taxes? Let’s talk!