Michigan Community Tax Credit
Originally signed into law December 29, 1988, the Michigan Community Foundation Tax Credit was designed to encourage individuals and businesses to build the permanent endowments of community foundations across the state.
The State of Michigan provides a state tax credit for gifts to certified community foundations in Michigan. Only contributions which are placed in a permanent endowment are eligible for the Michigan Community Foundation Tax Credit. Here’s the way it works for both individuals and corporations:
The law permits a taxpayer to reduce Michigan income tax or Michigan Business Tax liability by a credit of 50 percent of the amount contributed to a community foundation, subject to a maximum credit of:
- $100 for an individual filing singly (for a $200 donation)
- $200 for a married couple filing jointly (based on a $400 donation)
- $5,000, or 10 percent of 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 tax liability before claiming any credits, whichever is less, for taxpayers filing a Michigan Business Tax return (based on a $ 10,000 gift).
This credit is in addition to those available for donations to Michigan colleges and universities, public libraries, public broadcasting stations and homeless programs. Your donation continues to be deductible as a charitable gift for federal income tax purposes.
Not all organizations that call themselves community foundations qualify for the tax credit. Only those community foundations certified by the Michigan Department of the Treasury as qualifying for the tax credit are eligible.
Community foundations have four types of endowment funds:
- unrestricted — allows the Board of the Foundation to fund projects as it sees fit
- field-of-interest — such as youth, the environment, the arts, and scholarships
- donor-advised — allows the donor to recommend specific charities
- agency — established by local nonprofit organizations for their benefit (such as boys and girls club) or by public nonprofit organizations (such as libraries, school systems, and local units of government).
Gifts to any of these four types of endowment funds qualify for the tax credit.
Source: Council of Michigan Foundations
