Action Tax

Tax Attic

July 9, 2015 // 0 Comments

The tax business usually doesn’t make the front page in July but this year is different. The Supreme Court made two rulings last week that all of us are aware of. In separate split decisions, the justices ruled that Obamacare’s health premium tax credit was valid whether the taxpayer purchased insurance through a state-run or a federal-run exchange. Had they ruled that the credit was only available to those buying insurance through a state-run exchange, Obamacare would have been dealt a death blow. Most pundits believed the Supreme Court would rule in favor Obamacare. The make-up of the Court and it’s history almost guaranteed a 5-4 or 6-3 decision and sure enough, it was a 5-4 decision. What the pundits did not figure on is the logic used by the Court more or less making it difficult for any future regulations to be issued limiting the premium tax credit. Of course, Congress can always re-write portions or all of the law. The Republicans have the numbers to do exactly that but they don’t appear to have the political will to follow through. The extra horsepower to make changes could be provided should a Republican such as Ted Cruz be elected President. The future of Obamacare no doubt will be very interesting. In the second decision, the justices ruled that same-sex couples have a constitutional right to marry and all states must recognize such marriages regardless of which state the marriage took place in. Of course, there will be considerable tax consequences that will happen as a result of these decisions. We will find out about those as they occur. One big immediate question that requires an answer involves the filing of same-sex marriage income tax returns. Say a Michigan couple travelled in 2013 to one of the states where same-sex marriage was legal and were married. Michigan did not recognize this marriage so the couple, under Michigan law, had to file separate Michigan returns for 2013 and 2014. In 2015, per the Supreme Court, they will be able to a joint Michigan return. The question that begs clarification is this: can the couple amend their 2013 and 2014 tax returns to file a joint return for those years? There are advantages to filing joint but […]


February 5, 2015 // 0 Comments

On August 5, 2014, we had a state-wide vote that approved a change to the Personal Property Tax system. The changes were massive and affected every business that owned any equipment that was physically located in the state of Michigan. Historically, Michigan had taxed the equipment owned by businesses at basically the same rates that real property was taxed. The difference between the personal property tax and the real property tax was that personal property tax collected stayed right here in Rockford with zero going to the state of Michigan. The City of Rockford, Rockford Public Schools, Krause Library, Kent County and other local agencies all received a portion of the personal property tax without filtering it through the state government. Concerning the real property tax system which is a tax on land and buildings, all of the above entities receive funding through the collection of the real property tax but it is filtered through Lansing. Lansing has a habit of doing a good filtering with some of that money sticking to the filter, so to speak. Lansing was asking the local entities to give up non-filtered money. This was a non-starter until the Michigan legislature agreed to reimburse the local entities for revenue given up due to any changes. We taxpayers had to vote and agree to make the changes and we did. The change that affects the greatest number of businesses is called the “small business exemption”. Any business that has less than $80,000 of eligible personal property equipment can file an affidavit with the local assessor and that business will be exempt from personal property tax for the coming year. The catch, if there is one, is that the affidavit must be filed every year and it must be in the assessor’s hands by February 10. Miss that deadline and the business is subject to Personal Property Tax for the coming year. There seems to be no exception to this rule. Let’s just say that we make every effort to make sure that every qualifying client of Action Tax Service has an affidavit filed. The best part of the deal with Michigan is that all local entities will receive 100% replacement of the lost revenue. There are more changes that will kick […]


October 4, 2012 // 0 Comments

Michigan changes affect tax returns The questions are starting to flow in with more frequency as we get closer to the end of the year. An increasing number of people are beginning to wonder how all of the changes made by the State of Michigan will affect their tax return to be filed this coming tax season. I don’t blame them for wondering. It’s a fair question to ask because almost every person filing a Michigan return will be affected. There are four major areas of change that we should review. First, there were substantial changes for those receiving retirement benefits. Second, almost all of the non-refundable tax credits were eliminated. Third, exemption amounts were decreased. Fourth, the homestead property tax credit was revamped. This week, let’s discuss the retirement benefit taxability changes. They are categorized based upon the age of the recipient. For those born before 1946, the pre-2012 rules remain in effect. If I was a baker, I might say they will continue to get the whole loaf of deductions. Their social security is totally exempt from tax. 100 percent of their public pension amount is totally exempt. For private pension recipients, up to $47,309 for single filers and $94,618 for joint filers is exempt. Taxpayers not receiving a pension will continue to receive a subtraction for interest, dividends and capital gains. Taxpayers born in 1946 through 1952 will get only half a loaf of deductions. Before these taxpayers reach age 67, their social security will be exempt; their railroad pension will be exempt; and their military pension will be exempt. However, they will not receive the subtraction for interest, dividends and capital gains. In addition, the total pension subtraction for public and private pensions will be limited to $20,000 for singles and $40,000 for joint filers. After these taxpayers reach age 67, the rules will change once again. Social security will remain exempt. Railroad and military pension amounts will be exempt but if the taxpayer chooses this deduction, the $20,000/40,000 deduction will not be allowed. The subtraction for interest, dividends and capital gains will not be allowed. Finally, and of most importance, the taxpayer’s $20,000/40,000 deduction will be allowed as a subtraction against all income. Currently, the subtraction is only allowed against […]