Mich. Admin. Code R. 206.16

Current through Vol. 24-19, November 1, 2024

Section R. 206.16 - Credit allowed resident for income tax paid to other states

Rule 16.

(1) A resident taxpayer is allowed a credit for tax imposed on income which is also subject to tax by another state of the United States, or political subdivision thereof, or the District of Columbia. This credit is limited to the smaller of (a) the Michigan tax on such income or (b) the tax imposed by the other state. The credit is that portion of the Michigan income tax that the income which is subject to tax in both states bears to total taxable income. Example:

Michigan wages .........................................	$ 8,000.00
Wages earned in another state&&&&&&	& 2,000.00
United States government bond interest&&&	. 1,000.00 _________
Adjusted gross income&&&&&&&&&	& 11,000.00
United States government bond interest&&&	1,000.00
Total taxable income&&&&&&&&&&	.. 10,000.00
Income subject to tax in both states $2,000.00	or 20%
Taxpayer has 2 exemptions 2 X $1,500.00 &&&&&&&&&&&&	& 3,000.00
Taxable balance &&&&&&&&&&&&	7,000.00
Tax @ 4.6% .....................................................	... 322.00
Tax paid to other state; $70.00
Maximum credit allowed 20% of $322.00&&	$ 64.00

In this example, the taxpayer cannot claim the full $70.00 paid to another state as his credit is limited to 20% of $322.00 or $64.40. The credit cannot exceed the amount paid to another state.

(2) Since Michigan allows a subtraction of income attributable to other states the credit is ordinarily limited to tax imposed on compensation received for services rendered in another state.

Mich. Admin. Code R. 206.16

1979 AC