LANSING, Mich. — Legislation that would ensure Michigan residents are able to claim personal exemptions on their state taxes was recently approved by the state Senate.
“There has been a lot of talk about tax reform on both the state and federal level,” said Sen. Marty Knollenberg, R-Troy. “The recent federal tax overhaul has caused some confusion as to whether or not the exemptions will remain — and that has caused a great deal of uncertainty for Michigan residents.”
While the Federal Tax Cuts and Jobs Act, which was recently signed by the president, lowers tax rates and doubles the standard deduction, there has been some concern as to whether or not it ends the federal personal exemption. Though the exemption is not explicitly eliminated by the federal statute, it has been set to zero.
Because Michigan’s current state income tax law ties the state’s personal exemptions to the federal exemption, many are unsure if they will be able to claim the exemptions on this year’s state taxes.
“Without these bills, Michigan taxpayers will continue to face uncertainty as to whether or not they would be able to claim the personal exemptions on their state taxes,” Knollenberg said. “If we take no action and the exemptions end up being eliminated, it would significantly affect middle class families and their budgets.”
SB 750, sponsored by Knollenberg, deals with the City Income Tax Act and related exemptions for the 22 Michigan cities that levy an income tax. The bill would amend the City Income Tax Act to allow a taxpayer to use the number of personal and dependent exemptions authorized by the Michigan Income Tax Act, instead of what is allowed by the federal Internal Revenue Code, ensuring that exemptions for city income taxes remain in place.
“This legislation would ensure the same local personal exemption remains intact regardless of the changes at the federal level,” Knollenberg said.
SBs 748 and 750 have been sent to the House of Representatives for further consideration.