Michigan Household Income Resources
Michigan's tax system uses the concept of "Total Household Resources" to determine eligibility for certain tax credits, particularly the Homestead Property Tax Credit. This measure helps assess a household’s financial situation for tax purposes, especially when annualizing income for part-year residents or those with irregular income.
What Are Total Household Resources?
Total Household Resources (THR) refer to the combined income and resources of all individuals living in a household. For Michigan tax purposes, THR is used to calculate the percentage of Homestead Property Tax Credit a household may claim. The credit phases out based on THR levels.
How to Annualize Total Household Resources
For part-year residents or those who did not live in Michigan for the entire year, THR must be annualized to reflect a full-year equivalent. The process is as follows:
- Step 1: Divide 365 by the number of days the taxpayer was a Michigan resident in 2025.
- Step 2: Multiply the result from Step 1 by the taxpayer’s total household resources (reported on MI-1040CR, line 33).
- Result: The annualized total household resources, used to determine credit eligibility.
Homestead Property Tax Credit Phase-Out Based on THR
The Homestead Property Tax Credit is reduced (phased out) as total household resources increase. The phase-out schedule is as follows:
- $62,500 or less: 100% credit allowed
- $62,501 – $63,500: 90% credit allowed
- $63,501 – $64,500: 80% credit allowed
- $64,501 – $65,500: 70% credit allowed
- $65,501 – $66,500: 60% credit allowed
- $66,501 – $67,500: 50% credit allowed
- $67,501 – $68,500: 40% credit allowed
- $68,501 – $69,500: 30% credit allowed
- $69,501 – $70,500: 20% credit allowed
- $70,501 – $71,500: 10% credit allowed
- $71,501 and above: 0% credit allowed
When Is THR Used?
THR is primarily used for:
- Determining eligibility and amount of the Homestead Property Tax Credit (MI-1040CR Table 1).
- Annualizing income for part-year residents (as per MI-1040 instructions).
- Supporting documentation for income verification in audits or inquiries (as referenced in FAQ).
Important Notes
- THR is not the same as Adjusted Gross Income (AGI); it includes all household income and resources.
- For nonresidents or part-year residents, annualizing THR ensures fair comparison with full-year residents.
- Supporting documentation may be required if audited or if income is reported on a composite return.
Source:
Form MI-1040
Form MI-1040CR-2
FAQ
Disclaimer: Always verify information with official Federal or State Department of Revenue Forms and Instructions.