Category: Government Benefits and Programs
But, before delving into the tenets of the Michigan Home Heating Credit, let us begin by first stating for the record that understanding tax code is certainly not my strong suit (area of expertise) but I wanted to expound on this important tax credit because it has some strong implications for low-income households. Although, tax season is technically over it is always an appropriate time for tax preparation and planning. Tax preparation is not just filling out forms and putting them in the mail, it is also an active planning process of making informed decisions throughout the year that are most beneficial in maximizing your returns when it’s time to file.
Even more relevant to the topic, for our purposes, is that new work requirement legislation has passed in Michigan. It will mandate all able-bodied adults to return to work, school, or job training for a minimum of 29 hours a week to keep their Medicaid. This new legislation termed the “workforce engagement rule” is actually a revisit to President Clinton’s “welfare-to-work” initiative under the Personal Responsibility and Work Opportunity Act (PRWORA) of 1996 that created TANF. Temporary Aid to Needy to Families (TANF) is our current system of welfare benefits that replaced Aid to Dependent Children (ADC), created by President Roosevelt’s New Deal during the 1930s Great Depression. It later became Aid to Families with Dependent Children (AFDC) in the 70s. Of course, the open-ended benefit structure of ADC/AFDC is a thing of the past and lawmakers are doing everything possible to be sure of it.
To the point, the new “workforce engagement rule” passed in the Michigan Senate in April 2018 and will go into effect in October 2019. One month after the expiration of the Michigan Energy Assistance Program (MEAP) which funds utility bill payment assistance programs across the state. Needless to say, lots of changes are coming and many will be required to enter the workforce and encounter tax laws that they may not understand. Still, many others who are already employed may not be fully aware of the existing tax structures and how they may benefit or be adversely affected by them. This information is critically important to recipients of unearned income (i.e. state cash assistance (FIP), disability, etc.) and low-wage earners, particularly those who supplement their incomes with food stamps (FAP).
The first issue with the Home Heating Credit is to understand what a “homestead” is and what it isn’t. The short answer is that a homestead is your primary residence. A homestead is not the house that you use for rental property, a vacation home, cottage, college or university operated housing (i.e. dorms, apartments, resident halls), or a home you have in another state. You are only qualified to claim the Homestead Credit for your permanent home where you live in Michigan. You must be the owner and occupant or contracted to pay rent and occupy the home. You can only have one (1) homestead at a time.
General eligibility criteria are as follows:
The Standard Credit
You must be eligible to use the standard method and indicate on the Home Heating Claim if your heating costs are in someone else’s name or included in the rent. The standard credit computation is based on the standard allowances for the number of exemptions you claimed.
You may be eligible to use the standard method if:
Table A - Standard Allowance Table
(Note: If you lived in your homestead less than 12 months, the standard allowance must be prorated)
The Alternate Credit
The alternate credit allowance utilizes home heating costs to calculate your credit. You must add up the amounts you were billed for heat from November 1, 2016 to October 31, 2017. If you buy bulk fuel (oil, coal, wood, or bottled gas), add your receipts to get your total heating cost. Be sure to maintain receipts as treasury may request them to verify your claim.
You Are Not eligible to calculate the credit using the Alternate method if:
Table B – Alternate Credit Computation Table
Total Household Resources
The goal in tax planning is to find ways to reduce your taxable income. You begin that process by analyzing your household income and assets. Total household resources include all income received by all household members during the year, including income that might be exempt from federal adjusted gross income. Losses from business activity may not be used to reduce total household resources. Some things to consider as household resources include:
Other Qualifying Special Circumstances
You may claim the credit if you share a home with another contracted renter who pays a share of the rent (i.e. roommates). Each occupant should file a claim based on their individual total household resources and share of the standard allowance. Use Table A to determine the standard allowance for the number of occupants in the home.
You may qualify for the credit as a Part-Year Resident if you occupied your Michigan home (own or rent) for less than twelve (12) months. See the link “Michigan Home Heating Credit – Homepage” for information on how to calculate the credit.
You do not qualify for the credit if you live in a licensed care facility (i.e. Adult Foster Care, Licensed Home for the Aged, Nursing Home, and Substance Abuse Treatment Centers). However, subsidized senior apartments are not licensed care facilities and senior citizens may apply for the credit.
If a claimant dies before the end of the tax year, a personal representative or surviving spouse may claim the standard heating credit but may not claim the alternate credit. In the case of a surviving spouse, file a joint claim using the same number of exemptions you would have used had your spouse lived all year. You must report the deceased’s income, date of death, and write that you are “Filing as a Surviving Spouse” in the appropriate sections of the claim. There are additional special instructions if you are filing as a personal representative for a deceased single taxpayer or if both taxpayers are deceased. See the Michigan Home Heating Credit – Homepage link below.
Other important factors to keep in mind:
People rarely think of tax credits as a utility assistance program such as the Michigan Energy Assistance Program (MEAP) or Low-Income Self-Sufficiency Program (LSP) both of which we have previously discussed. But, the Home Heating Credit is, in fact, a federally-funded energy assistance program, administered by several State of Michigan agencies and designed to benefit low-income households. But it is important to know that the Home Heating Credit can affect the amount food assistance benefits you receive.
According to the Michigan Department of Health and Human Services, food benefits for some renters may be increased if the household received a home heating credit greater than $20 in the current month or previous twelve (12) months. This is important for renters whose heating costs are included in their rent. You can make sure that your home heating credit is used to calculate your food benefits by informing your DHS worker or indicating it on your MDHHS public assistance application. If you receive any type of public assistance your Home Heating Credit will be paid directly to your utility provider and credited to your account.
Be sure to visit the Michigan Home Heating Credit – Homepage for more important information regarding mistakes to avoid in filing your claim, the payment process, how to check the status of your home heating credit, forms and instructions, and other helpful information. Click the links below for more information on free tax preparation services, tax planning, how to calculate your Total Household Resources, qualified health insurance premiums, and how to file your Michigan Home Heating Claim. See the link “Home Heating Credit and Shared Housing Situations” for information on how to calculate the credit.
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Free Tax Preparation Services
Community Resources - Utility Assistance
Tax Planning for Beginners (Turbo Tax article)
Michigan Home Heating Claim Instruction Booklet
Michigan Home Heating Credit - Homepage
Checklist for Total Household Resources
List of Income and Deductible Items from Total Household Resources
Qualified Health Insurance Premiums
Home Heating Credit and Shared Housing Situations
MI Bridges: Apply for Assistance or Manage Your Account
Welcome to The Community Advocate Network. My name is Deborah Mitchell, I am a graduate in Social Work and Registered Social Work Technician. My human service background began in 2007 which includes medical case management and service navigation for the indigent population, outpatient mental health counseling with substance use and abuse disorders, supportive employment and job development for mental health consumers, and structured living domicile management.