206.16 Credit allowed resident for income tax paid to other states.

Rule 16. (1) A resident taxpayer is allowed a credit for tax imposed on income which is also subject to tax by another state of the United States, or political subdivision thereof, or the District of Columbia. This credit is limited to the smaller of (a) the Michigan tax on such income or (b) the tax imposed by the other state. The credit is Courtesy of www.michigan.gov/orr that portion of the Michigan income tax that the income which is subject to tax in both states bears to total taxable income. Example: Michigan wages......................................... $ 8,000.00 Wages earned in another state………………… 2,000.00 United States government bond interest………. 1,000.00 _________ Adjusted gross income………………………… 11,000.00 United States government bond interest……… 1,000.00 _________ Total taxable income………………………….. 10,000.00 Income subject to tax in both states $2,000.00 or 20% Taxpayer has 2 exemptions 2 X $1,500.00 ………………………………… 3,000.00 Taxable balance ……………………………… 7,000.00 Tax @ 4.6%........................................................ 322.00 Tax paid to other state; $70.00 Maximum credit allowed 20% of $322.00…… $ 64.00 In this example, the taxpayer cannot claim the full $70.00 paid to another state as his credit is limited to 20% of $322.00 or $64.40. The credit cannot exceed the amount paid to another state. (2) Since Michigan allows a subtraction of income attributable to other states the credit is ordinarily limited to tax imposed on compensation received for services rendered in another state. History: 1979 AC. R 206.17. City income tax credit. Rule 17. (1) Each person subject to tax under Act No. 281 of the Public Acts of 1967, being §§206.1 through 206.532 of the Michigan Compiled Laws, may claim a credit for a portion of the income taxes levied by cities in Michigan that are deductible if that person had not elected the standard deduction. For purposes of computations of this credit, city income taxes do not include penalties or interest paid. (2) The amount of city income taxes used as a basis for computation of this credit shall be the city income tax paid by the taxpayer in the tax year. The tax paid shall be reduced by any refund of overpaid taxes of a prior year. (3) If a person is assessed and pays additional city income taxes applicable to prior years, the additional taxes paid shall be added to the city income tax of the year in which they are paid for purposes of computation of this credit. History: 1979 AC; 1998 - 2000 AACS.