by James Michael Curcio, Hotline Intern
Many older Americans count themselves among the 45% of taxpayers who do not pay federal income tax, either because their income is too low or because their income is not taxable. While not owing federal taxes does not necessarily mean you do not owe state taxes, it is likely that if you are not filing a federal return, you are not filing a state return either. And, if you are not filing a Michigan return you are likely missing out on valuable Michigan tax credits.
The Homestead Property Tax Credit and the Home Heating Credit are refundable assistance credits that can help reduce housing costs, particularly for low- and fixed-income seniors. Importantly, making a claim for these credits does not require filing an entire tax return if you are not otherwise required to do so. Both the Homestead Property Tax Credit and the Home Heating Credit can be claimed on separate forms which can be filed separately from an income tax return.
The Homestead Property Tax Credit refunds a portion of property taxes imposed in a given tax year. A claim for the credit can be made not only by homeowners, but by renters as well since part of their rent goes to the payment of property taxes. The refund’s basis on taxes imposed as opposed to taxes paid means two things for homeowners. First, a claim cannot be made for taxes paid in years after the year they were due. Second, and more importantly, the claim can be made whether or not the taxes are actually paid. This allows homeowners to delay the payment of their fall property taxes until they receive a refund the following spring. This can provide a much needed lump sum to assist with the payment of an individual’s property tax burden.
To be eligible for the Homestead Property Tax Credit your total household resources must be $50,000 or less and the taxable value of your home must be $135,000 or less. The maximum refund is currently $1,200 (this will increase to $1,500 for the 2018 tax year) and is based on total household resources, which include not only your income, but gifts and inheritances you’ve received and expenses paid on your behalf. In many cases seniors may be eligible for larger credits than their younger counterparts with the same amount of household resources. For renters, 20% of their rental payments are eligible for the credit. Seniors who are residents of nursing homes or assisted living facilities cannot make a claim for the credit based on rent paid, but if the facility is required to pay property taxes (many are not) and the facility’s fees are not paid by Medicare or Medicaid, your are entitled to claim your portion of the property taxes.
The Home Heating Credit refunds a portion of your annual heating cost. The amount of the benefit, much like the Homestead Property Tax Credit, is based on your total household resources. The resource limitation for this credit is significantly lower than that of the Homestead Property Tax Credit and is based on the number of exemptions you can claim. If you are single and claim only one exemption you must have less than $13,727 in total household resources in order to be eligible for a refund. The value of the refund has no stated maximum, but because of the low resource limitation the refund will usually not exceed a few hundred dollars, and is more likely to be in the $50-$200 range. This refund is usually paid directly to your energy provider and credited to your account.
Application for the Home Heating Credit can have a far reaching impact for a low-income individual. Aside from the obvious assistance in paying for heating your home, application for the Home Heating Credit can affect food assistance benefits you receive. Supplemental Nutrition Assistance Program (SNAP) benefits are tied to heating assistance. If you receive more than $20 in heating assistance you may qualify for increased SNAP benefits. This threshold was until recently only $1, so if you saw a significant decrease in your SNAP benefits in 2014, it was likely due to this change. If you are currently receiving SNAP benefits and have not filed a Home Heating Credit claim, it is possible you are eligible for an increased benefit and you should contact your specialist. If you are receiving SNAP benefits and stop filing Home Heating Credit claims, you could lose a portion of that food assistance. For more information about the connection between the Home Heating Credit and SNAP benefits, or for application assistance, contact the MiCAFE Network at 877.664.2233.
If you have not been filing either of these claims and think that you’re eligible you do not have to worry. If you were not required to file an income tax return, the deadline for filing Home Heating Credit claims for 2015 is September 30, 2016. As for the Homestead Property Tax Credit, a claim can be filed any time within five years. That means that if you file before April 15, 2017 you can make a claim for property taxes imposed as early as 2012.
If you are eligible for these credits you may also be eligible for free tax preparation assistance through the IRS Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) programs. Click here to find a provider near you and maximize the benefits you receive.
Don’t Have to File a Michigan Income Tax Return? Maybe You Should Anyway
by James Michael Curcio, Hotline Intern