Michigan expanded Earned Income Tax Credit Explainer: Do I qualify and how much can I receive?
(FOX 2) - Some Michigan taxpayers can expect more money when they get their refund next year under the amended Earned Income Tax Credit law that was signed by the governor in 2023.
The Michigan EITC is a tax benefit for individuals who work in the state and have an income level below a certain level. Similar to the federal EITC, it's intended to help put more money back into the hands of people or families by reducing the amount they owe on their taxes.
There are two reasons why next year's refund will be bigger for those who qualify. One reason is because Michigan expanded the state EITC by five times the original rate. The other reason is that the expansion is retroactive to the 2022 tax year, which means eligible families will also receive supplemental checks from that filing as well.
Families that qualify will see an average of $550 from the state tax benefit.
According to Michigan, more than 700,000 Michigan households qualify for the tax credit.
Michigan tax credit will be sent to 700,000 families with an average of $550 being issued
The Working Families Tax Credit quintupled in size under a new law passed this year, which means the state income tax credit will be much larger than in previous years. Here's how much an average family will receive
What is the EITC?
The EITC is a tax benefit that's made available to qualifying working individuals and families who make under a certain income level.
There are two tax benefits available to those who qualify: one through the federal government and one through the state government. The Michigan EITC's expansion raises it from 6% to 30% of the federal EITC.
If you qualify for the federal benefit, you also qualify for the state benefit.
What counts as earned income?
According to the IRS website, earned income includes all taxable income and wages that someone receives for working for someone else, themselves, or a business or farm the individual owns.
It could be wages, salary, or tips where federal income taxes are withheld. It could also be income from a job where the employer doesn't withhold taxes. Many of those jobs fall under "gig economy" work like selling goods online and transporting riders for a driveshare business like Uber and Lyft.
It doesn't include interest and dividends, pensions, social security, and unemployment benefits.
How do I know if I qualify?
There are several factors that someone's EITC tax credit depends on, including income, filing status, whether someone is disabled, and the number of qualifying children a household has.
For example, if a married couple with two kids earned $59,478 in 2023, they would earn $6,604 from the federal EITC. The state tax benefit is determined by taking 30% of the federal benefit. In this case, it would come out to $2,229.
The maximum income and child limits for the federal EITC in 2023 and 2022 are below:
2023 Tax Year - The maximum income one can earn to qualify:
- For zero children, $17,640 for single filers, $24,210 for joint filers
- For one child, $46,560 for single filers, $53,120 for joint filers
- For two children, $52,918 for single filers, $59,478 for joint filers
- For three children, $56,838 for single filers, $63,398 for joint filers
For those under the income limit, the maximum credit amounts:
- No qualifying children: $600
- 1 qualifying child: $3,995
- 2 qualifying children: $6,604
- 3 or more qualifying children: $7,430
2022 Tax Year
- For zero children, $16,480 for single filers, $22,610 for joint filers
- For one child, $43,492 for single filers, $49,622 for joint filers
- For two children, $49,399 for single filers, $55,529 for joint filers
- For three children, $53,057 for single filers, $59,187 for joint filers
For those under the income limit, the maximum credit amounts:
- No qualifying children: $560
- 1 qualifying child: $3,733
- 2 qualifying children: $6,164
- 3 or more qualifying children: $6,935
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Tax benefits in 2022
The expanded Michigan EITC was signed in 2023 but will include the 2022 tax year as well. Eligible people and families that qualified for the state tax benefit in 2022 received the original 6% benefit.
But come the 2024 tax year, those who qualified for the benefit will receive a supplemental check that makes up the difference between the original 6% benefit and the newly-expanded 30% rate.
Those supplemental checks will start being issued on Feb. 13, 2024 and will be mailed over a five-to-six week period. The checks will be sent to the most recent address that the treasury department has on file.
You do not have to file an amended 2022 tax return to receive the supplemental check.