This week, the Senate passed legislation, 37-0, ensuring Michigan taxpayers can continue to claim the personal exemption on income taxes. Due to a quirk in current laws, Michigan’s exemption was tied to the federal government’s rate. Following the recent federal tax reform, which eliminated the exemption, taxpayers in Michigan would no longer be able to claim the exemption on state income taxes. In the Senate-passed proposal, not only would the exemption be retained, but it would increase from $4,000 to $5,000 by 2021, and tie the exemption to the rate of inflation. This bill was referred to the House Tax Policy for consideration. Additionally, the above-mentioned Senate bill is tie-barred to two other pieces of legislation; one that creates a state child care credit and a second that ensures residents who live in a city that impose a local income tax can still take advantage of the personal exemption at the local level. Those two bills will be voted on by the Senate next week.

The House also has a proposal to not only keep, but also raise the personal exemption on income taxes. The bill would raise the exemption in 2018 from $4,000 to $4,300, with gradual increased reaching $4,800 in 2020. The bills would also increase the personal exemption for tax filers aged 62 or older. It would provide a $100 refundable income tax credit for a single filer or $200 for joint filers. Lastly, like the Senate, the bills will ensure those with local income taxes can also continue to claim the personal exemption. The bills were referred to the House Tax Policy Committee for consideration.

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