Credits and breaks for Michigan families: the 30% EITC, the $5,900 exemption, the homestead credit

Michigan’s family policy on the income tax is two numbers. The first is 30%: the Michigan Earned Income Tax Credit for Working Families is 30% of the federal EITC, refundable, and anyone who qualifies for the federal credit qualifies for it. A parent with a $4,500 federal EITC gets $1,350 more from Michigan, paid even if no Michigan tax was owed. The second is $5,900, the 2026 personal exemption, allowed for the taxpayer, the spouse and every dependent claimed on the federal return. Each child is worth $251 of tax. There the list of child-specific breaks ends: no child tax credit, no credit for day care, no credit for school tuition or supplies. What fills the gap for a lower-income family is the Homestead Property Tax Credit, a refundable credit of up to $1,900 (2025 figure) that renters claim on 23% of their rent, and which a working family with modest income often finds is worth more than the EITC. The federal return carries the heavy lifting for families; the Michigan return adds 30% on top of one credit, then hands back a share of the rent.

Because the MI-1040 starts from federal AGI, every family decision made on the federal return carries straight over. Who claims the child, which parent files head of household, whether the child is a qualifying child for the EITC: Michigan follows the federal answer and asks no questions of its own. The federal dependent care credit, child tax credit and education credits are below-the-line items on the federal side and simply do not exist here; there is nothing to add back and nothing to claim.

The Michigan EITC

The credit is 30% of the federal earned income credit, entered on the MI-1040 (line 28 of the 2025 form), and it is refundable. If you qualify federally, you qualify here; there is no separate Michigan income test, and a resident need not have any Michigan taxable income. Part-year residents qualify; a nonresident qualifies only with Michigan taxable income. You must file a federal return claiming the federal credit and a Michigan return claiming the Michigan one, even if you otherwise owe nothing and would not have to file. The maximum Michigan credit for 2024, the last year the Department of Treasury has posted, was $2,349, 30% of the federal maximum for three or more children; the 2026 maximum is to come with the federal figure.

The credit went from 6% to 30% in Public Act 4 of 2023, the same law that restored the pension subtraction, and the Department paid the 2022 difference as a separate check in early 2024. For 2026 the 30% is simply on the return. Nothing in the 2025 federal law changed who qualifies for the federal EITC, so nothing changed in Michigan.

Dependents and the exemption

Line 9a of the MI-1040 counts the taxpayer, the spouse on a joint return and each dependent claimed federally, and multiplies by $5,900 for 2026 ($5,800 for 2025). The exemption is the same for a newborn and a 23-year-old student; it is the same at $30,000 of income and at $3 million, with no phase-out. A couple with three children claims $29,500, which shelters the first $29,500 of Michigan income and is worth $1,254 of tax. A child who files a return of their own because they had summer wages gets $1,500 instead of $5,900 on that return, and the parents keep the $5,900.

Three additions matter to some families. A dependent, or a parent, who is deaf, blind, hemiplegic, paraplegic, quadriplegic or totally and permanently disabled earns a special exemption on line 9b, $3,400 for 2025 with the 2026 figure to come, on top of the $5,900. A qualified disabled veteran earns $500 (2025 figure) on line 9c. And a stillbirth in the year earns a full $5,900 exemption on line 9d with the state Certificate of Stillbirth attached, a provision few states have.

What Michigan does not have

The federal figures are for orientation only and are covered in the federal articles linked below. The Michigan column is the point: the EITC, the exemption, the 529 subtraction and the homestead credit are the whole list.

The homestead credit for a family that rents

The Homestead Property Tax Credit on form MI-1040CR is the piece of the Michigan return that most often surprises a young family, because it does not require owning a home. A renter’s “property tax” is 23% of rent paid for the year (10% in service-fee housing, and a $3-a-month figure plus the rest of the rent for a mobile home lot). The credit is 60% of the amount by which that figure exceeds 3.2% of total household resources, up to $1,900, and it is cut by 10% for each $1,000 of resources above $62,500, disappearing at $71,500. Those are the 2025 limits; the Department indexes them and the 2026 figures were not yet posted. The credit is refundable and is paid with the income tax refund, or on its own if no MI-1040 is required.

“Total household resources” is the trap. It is wider than AGI: it adds back nontaxable income such as child support received (verify), Supplemental Security Income, workers’ compensation, the nontaxable part of Social Security, gifts over $300 and the share of a roommate’s rent, and it does not allow business, farm or rental losses to reduce it. A parent with $38,000 of wages and $4,800 of child support has $42,800 of resources, not $38,000. Renters must give the landlord’s name and address and the months rented; a family that moved during the year lists both addresses and the rent at each. Someone who lived in Michigan less than six months cannot claim it.

A family that owns its home uses the property tax levied on it for the year, summer and winter bills together, and the taxable value from the assessment notice. If taxable value exceeds $165,400 (2025) there is no credit regardless of income. The Principal Residence Exemption, which removes most school operating tax from an owner-occupied home, is a separate matter claimed once with the township or city assessor on Form 2368 after a purchase, and a new owner who forgets it overpays every year until it is filed.

Saving for school: the 529 subtraction

Contributions to the Michigan Education Savings Program or the MI 529 Advisor Plan are subtracted on Schedule 1, line 17, up to $5,000 on a single return and $10,000 on a joint one, net of any qualified withdrawals taken the same year. MiABLE accounts for a child with a disability get a separate $5,000 / $10,000 on the same line, so the line’s overall cap is $10,000 / $20,000. The subtraction belongs to whoever makes the contribution and files a Michigan return: a grandparent who deposits $10,000 into a grandchild’s MESP account subtracts it on her own joint return and saves $425, while the parents’ own deposits count against the parents’ limit. Contributions to another state’s plan earn nothing. Payments on a Michigan Education Trust prepaid tuition contract are subtracted in full on line 18, with no cap. A withdrawal that is not used for qualified expenses, or an MET refund, is added back on line 8. Whether a withdrawal used for K-12 tuition, qualified under federal law, is also qualified for Michigan is a question for a Michigan practitioner (verify).

Head of household, dependents and the quirks

Michigan uses the federal filing status, and it has no head-of-household rate or extra exemption; the flat 4.25% and the $5,900 per person are the same for every status. Head-of-household status still matters here because the dependents claimed on the federal return are the dependents claimed on the MI-1040, and because the federal EITC that drives the Michigan credit depends on it. Divorced parents who alternate years follow the federal result, including when Form 8332 releases the exemption to the noncustodial parent: the noncustodial parent then claims the $5,900 in Michigan, while the EITC, which never transfers, stays with the custodial parent and so does the 30% Michigan credit.

Married couples who file jointly federally must file jointly in Michigan. A couple who file separately federally may file either way here, and because Michigan’s rate is flat the choice rarely matters to the tax, but it does matter to the homestead credit, which uses the resources of the whole household regardless of who files.

Families in one of the twenty-four cities with an income tax get a second, smaller exemption on the city return: Detroit allows $600 per person, so a family of four removes $2,400 from income taxed at 2.4%. The other cities set their own exemption amounts (verify).

The Home Heating Credit

A separate claim, form MI-1040CR-7, pays a credit toward heating costs for low-income households, with income limits that rise with household size and are set each year in the form’s instructions. It is usually paid as an energy draft sent to the heating utility rather than as cash. The claim for 2026 is due September 30, 2027, well after the income tax deadline, and can be filed on its own by a household that files no MI-1040. Full-time students claimed as dependents, and households in licensed care facilities or college housing all year, do not qualify.