Monday, February 19, 2007

City Income Taxes

I had a lengthy conversation about the City of Detroit's income taxes with a fellow Warrendale resident recently. It turns out that he didn't know about any of the ways to offset the cost of Detroit's resident income taxes. In the interest of passing along useful information to my neighbors, I wanted to mention a couple of things.

First, if you itemize your taxes then any taxes you pay to the state or local government are deductible from your federal taxes. For some folks, especially if your adjusted gross income is less than $30,000, it generally isn't worth it to itemize your tax deductions. For those of you who do itemize, don't forget to include your Michigan and Detroit taxes in that list.

From everyone who pays taxes, there is also the fact that a portion of your Detroit income taxes can be used as a credit towards your Michigan income taxes. When you're preparing your Michigan tax return, don't forget that section of the form.

Neither of these things will offset 100% of your city income taxes. However, this does take a large chunk of the bite out.

In the interest of full disclosure, I should mention that I'm working part-time as a tax preparer at one of the tax agencies in the neighborhood. Business was a bit slow in the end of 2006 so I needed the extra income.

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