The Tax Attic with Jerry Coon

NKSC donations now qualify for Michigan tax credit

The Michigan Treasury Department works year round. It may be a slimmed-down version compared to the tax season, but those working seem to be working hard. Those of us in the professional tax business see evidence of their efforts from time to time. Usually a taxpayer will receive a letter or some correspondence from Treasury, requesting verification of a transaction or requesting that the taxpayer send Treasury some money for an error on a tax return. That is the type of effort that we could really live without. However, once in a while, we get some really good news from Treasury.

Jerry Coon, Enrolled Agent

Recently, the North Kent Service Center (NKSC) received a letter determining that it qualifies as a certified Homeless Shelter/Food Bank. This is extremely good news for NKSC. As a certified Homeless Shelter/Food Bank organization, monetary contributions made direct to NKSC qualify for a credit on the Michigan tax return.

This particular credit is one of the best credits known to mankind. On a joint Michigan tax return, 50% of a contribution up to $400 qualifies as a credit against income tax liability. Give $400 to NKSC and receive $200 of tax credit. On a single return, the limit is 50% of up to $200, which generates $100 of tax credit. This is a non-refundable credit, so the taxpayer has to have some liability. But for those with a tax liability, this is a wonderful way to reduce that tax liability and help out a local organization.

A further advantage of making contributions is that they are also allowable on the federal Schedule A as a charitable contribution. For taxpayers who do itemize their deductions, this really reduces the final net out-of-pocket cost. For example, taxpayers in the 25% federal income tax bracket make a $400 contribution to NKSC. They will receive a $200 tax credit on their Michigan tax return. They will also receive a $400 deduction on their Schedule A. This deduction, since they are in the 25% tax bracket, saves them $100 in taxes ($400 times 25%). They will save $200 of Michigan tax and $100 of federal tax for a total tax savings of $300. Their net out-of-pocket cost for writing a $400 check to NKSC is $100.

By coupling together the federal deduction and Michigan tax credit, NKSC has the use of $400 at a final cost to the taxpayers of $100. Now that’s the deal of a lifetime for both of the parties. It must be noted, however, that on the Michigan return, no credit is allowed for non-cash, non-food or in-kind items donated to NKSC. These deductions qualify for a federal deduction, but not a Michigan credit. Donations of food will not qualify for the Michigan credit. Donations of clothing will not qualify for the Michigan credit. Donations of household goods will not qualify for the Michigan credit. Only donations of money qualify. Michigan does require proof of the donation be maintained for four years, and they do reserve the right to challenge any donation. In fact, they currently are spot-checking donations made on 2007 tax returns.

Allow me to give a small plug for NKSC. The agency has been in existence since 1973 and at its present location between 12 and 13 Mile roads at 10075 Northland Drive since 2003. NKSC is, for all practical purposes, the United Way’s contact location in northern Kent County. They are officially a United Way partner agency.

Since the downturn in Michigan’s economy, NKSC has been serving more and more people. For example, in 2002 there were 12,121 client visits to their center. By 2009, that number had grown to 20,468 visits. In 2002, NKSC gave out 348,686 pounds of food to needy clients. By 2009, that number had grown to 732,448 pounds. In 2002, there were 2,811 requests for food. By 2009, there were 19,007 requests for food. In 2002, there were 15,333 volunteer hours at the center. By 2009, that number had grown to 31,139. Finally, the year NKSC opened in downtown Rockford, 1973, its budget was $1,000. In 2009, the budget was $443,900. Check out their website at www.nksc.net for further information.

NKSC Executive Director Sandy Waite and the Board of Directors squeeze every dollar they receive to fulfill their mission of people helping people. This is one local organization that helps local people. The state of Michigan has given us one more reason, a very good reason, to help them fulfill their mission. Consider making a donation and taking advantage of one of the real good tax laws out there. This is Jerry Coon signing off. 

Jerry Coon is an Enrolled Agent. He owns Action Tax Service in Rockford. Contact Jerry at www.actiontaxservice.com.

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