Michiganians working in Ohio may be in luck

2/18/2011

Michigan's budget ax may have spared a little-known but much loved tax credit that each year quietly puts hundreds of dollars back into the pockets of Michigan residents who work outside the state in places such as Toledo.

Newly elected Republican Gov. Rick Snyder has proposed keeping the annual dollar-for-dollar credit Michigan residents receive for income taxes they pay to out-of-state municipalities — such as the 2.25 percent income tax collected by those who work in the city of Toledo — while axing the credit for taxes residents pay to Michigan cities such as Detroit.

The governor's budget proposal will need the approval of the Republican-dominated Michigan Legislature, which is trying to eliminate a deficit estimated at $1.8 billion. The state's freshman chief executive has proposed a number of changes to Michigan income taxes, including a controversial proposal that would have the state begin taxing private pensions for the first time.

For Michigan residents who earned $50,000 working in Toledo, elimination of the credit would have added $1,125 to their annual tax burden. Terry Stanton, a spokesman for the Michigan Department of Treasury, said that about 50,000 Michigan residents claim the tax credit for income taxes to other states or political subdivisions each year, accounting for about $44.4 million in additional refunds.

"The bottom line is, if you live in Michigan and work in Toledo, you get all that money back. It's a really nice thing for people that are in that situation," said Lori King, a certified public accountant at Accounting Center and Tax Services Inc. in Temperance.

Contact Larry P. Vellequette at lvellequette@theblade.com or 419-724-6091.