Many of Michigan’s low- and moderate-income families are still struggling to make ends meet despite a strong economy. People who never thought they’d be struggling are faced with the daily task of robbing Peter to pay Paul. For many, this time of year is eagerly awaited.
Its tax refund time — the time we get back the interest-free loan we gave the government last year. For many families and individuals, their tax refund is a needed infusion of cash to cover living expenses. Sadly, many of these same people are leaving a significant amount of cash on the table by failing to understand and utilize all the federal and state tax credits available to them when they file their 1040 for the year.
Federal tax credits include the Earned Income Credit, the Child Tax Credit, the Child and Dependent Care Credit and the American Opportunity Tax Credit. Michigan tax credits include the state Earned Income Credit, the Home Heating Credit and the Homestead Property Tax Credit.
Using one or more of these credits can have a great impact on the quality of life for a struggling family. For example, a couple raising three children, with an income of less than $52,427, could use the Earned Income Tax Credit and receive a combined federal and state credit of up to $6,512.
Another example is the State Homestead Property Tax Credit. Although the Legislature put more restrictive income and property value limits on place in the tax year 2012, the Homestead Property Tax Credit is still available to many Michigan residence. If your homestead (the principal place of residence) has a taxable value of no more than $135,000 and your total household resources are below $50,000, you could receive a credit up to the maximum of $1,200. The credit can be used to reduce the amount of taxes owed or if no taxes are owed it will be issued as a refund.
February 2015 was one cold month. I actually thought the thermometer on my deck was broken because it never seemed to get above zero. For many low- to moderate-income families living in poorly insulated homes, the shivering intensifies when they receive their monthly heating bill. The State Home Heating Tax Credit may provide some relief depending on income and number of dependents. A family of four could receive a credit of close to a $1000.
Let’s make one thing very clear: These credits are only available to people who are working. I’ll repeat myself — only available to people working and filing tax forms every year. Many of them are working two and three jobs just to feed and clothe their kids. Any additional help also helps our local economy.
Studies show that the EITC increases employment, reduces the need for public assistance and can help children who benefit do better in school and earn more as adults. In 2011, the state EITC was 20 percent of the federal level. It brought in $2,469,816 to the Grand Traverse region, helping 6,632 local families. In 2012, our wise state Legislatures cut it to 6 percent of the federal level, providing only $734,331 in credits to the 6,361 eligible families, thereby reducing the economic impact (read money in pockets) on Grand Traverse County by $1,735,486.
These are not freeloaders; they are consumers and our neighbors. People who receive these credits spend them in the local economy. They shop at Family Fare, Meijer and Younkers. If you're entitled to use them, then do so. If you’re not, then support them. Ultimately they help our economy grow. That’s good for all of us.
Fred L. Goldenberg is a Certified Senior Advisor (CSA) and the owner of Senior Benefit Solutions, LLC, a pre and post retirement income specialist and certified health insurance advisor in Traverse City. If you have any questions or comments about this article or any other senior issue he can be reached at 231-922-1010 or firstname.lastname@example.org.