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The State of Michigan provides
a special Tax Credit for charitable gifts made to certified
Michigan community foundations. The purpose of the tax
credit is to encourage individuals and corporations
to build the permanent endowment of community foundations.
Michigan law permits individuals and businesses to reduce
Michigan Income Tax or Michigan Single Business Tax
by a credit of 50 percent of the amount contributed,
provided the contribution is designated for permanent
endowment. This credit is in addition to those available
for donations to public broadcasting stations, Michigan
colleges or universities and public libraries.
The tax credits are subject to the following limitations:
- $100 for an individual
who is single or married and filing separately (based
on a $200 gift)
- $200 for a married
couple filing jointly (based on a $400 gift)
- $5,000 or 10 percent
of the tax liability before claiming any credits,
whichever is less, for a resident estate or trust
(based on a $10,000 gift)
- $5,000 or 5 percent
of the tax liability before claiming any credits,
whichever is less, for taxpayers subject to the single
business tax (based on
a $10,000 gift).
The following examples demonstrate
what a gift to the community foundation might actually
cost you under this provision of the Michigan Tax Code:
Sample Chart 1 - ABC
Corporation
Federal Marginal Income Tax Rate: 34%/Amount of Gift:
$10,000/Projected SBT Liability $100,000
| Impact of the gift
on Michigan state taxes:* |
$10,000 (Amount of
Gift) x .50 (State tax credit) = $5,000 |
Savings from Michigan
state taxes |
| Impact of gift on
federal taxes: |
$10,000 (Amount of
Gift) -$5,000 (Less SBT reduction) x .34 (Marginal
tax rate) = $1,700 |
Savings from federal
taxes |
| Total tax savings |
$5,000 + $1,700 =
$6,700 |
Total tax savings |
| Total actual cost
of gift |
$10,000 (Amount of
gift) - $6,700 (Total tax savings) = $3,300 |
Cost of gift |
Sample
Chart 2 - Married Couple (Itemizers)
Federal Marginal Income Tax Rate: 36%/Amount of Gift:
$400
| Impact of the gift
on Michigan state taxes:** |
$400 (Amount of Gift)
x .50 (State tax credit) = $200 |
Savings from Michigan
state taxes |
| Impact of gift on
federal taxes: |
$400 (Amount of Gift)
n .36 (Marginal tax rate) = $144 |
Savings from federal
taxes |
| Total tax savings |
$200 + $144 = $344 |
Total tax savings |
| Total actual cost
of gift |
$400 (Amount of gift)
- $344 (Total tax savings) = $56 |
Cost of gift |
Sample Chart 3 - Single Person (non-Itemizer)
Federal Marginal Income Tax Rate: N/A%/Amount of Gift:
$200
| Impact of the gift
on Michigan state taxes:** |
$200 (Amount of Gift)
x .50 (State tax credit) = $100 |
Savings from Michigan
state taxes |
| Impact of gift on
federal taxes: |
$200 (Amount of Gift)
x N/A (Marginal tax rate) = $0 (Non-Itemizer) |
Savings from federal
taxes |
| Total tax savings |
$100 + 0 = $100 |
Total tax savings |
| Total actual cost
of gift |
$200 (Amount of gift)
- $100 (Total tax savings) = $100 |
Cost of gift |
* Tax Credit is equal to
the smallest of 50% of the amount contributed. 5% of
net SBT tax liability or $5,000
** State tax liability must be $100 for single, $200
for married persons.
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