Renaissance Zones

WaterMark - Located Across From Hartshorn Marina in a Renaissance Zone

Muskegon has created a handful of renaissance zones (tax-free areas) to promote economic development. Condominiums – ideal for retirement living – have been among the first projects to make use of this extraordinary tax benefit.

Not only do developers benefit by locating in a renaissance zone, residents living there pay virtually no state or local taxes! That’s right: retire to a luxury condo and pay no property tax and no state or local income tax.

And make no mistake: Muskegon’s renaissance zones are located in the heart of an active, emerging downtown close to the waterfront, museums, and other cultural/entertainment amenities. Many of these condos have spectacular water views.

Here are the official details on renaissance zones from the State of Michigan and City of Muskegon:

Residential Tax Benefits

Most state and local taxes for individuals are abated in the Renaissance Zones. The tax benefits are phased out at 25% increments during the zone’s final three years of existence. Property owners are still responsible for property taxes levied to pay for local bonded indebtedness, school sinking funds, and special assessments. The following state and local taxes are abated for businesses located in a Renaissance Zone:

Local Real Property Taxes – General property taxes on land and homes are nearly 100% abated.

Personal Property – Personal property owned by individuals is 100% exempt under Michigan’s property tax system. (This applies only to businesses since residential owners have no personal property tax.)

6-mill State Education Tax (SET) – The state property tax levy for schools is 100% abated. This amount is included in your local property tax bill.

State Personal Income Tax – The state’s personal income tax rate is 4.35% in 2008 and is scheduled to decline to 3.9% by 2016. Individuals living in a Renaissance Zone are exempt from paying the state personal income tax.

Local Income Tax – City personal income taxes, if applicable in the zone, are 100% abated.

Important Michigan Pension Tax Law Changes to Know About

A new law governing how retirement income will be taxed starting in 2012 sets up a three-tier system, depending on a retiree's age. All three tiers avoid taxing Social Security income and military pensions. For couples, the age of the older spouse applies. Here's how the system works:

• Residents born before 1946 will continue to get the same tax breaks they have now. Public pensions will not be taxed. Income from private pensions, 401(k)s and IRAs will not be taxed on amounts up to $45,120 for single filers and $90,240 for joint filers. This will affect about 480,000 tax returns.

• Residents born between Jan. 1, 1946, and Dec. 31, 1952, will have all retirement income liable to tax, whether it's from a public or private pension, 401(k) or IRA. Exemptions can be claimed for up to $20,000 for a single filer and up to $45,000 for joint filers. Above those levels, retirement income will be taxed at the state income tax rate of 4.35 percent. When these residents turn 67, the $20,000/$40,000 exemption applies to all income, not just retirement income. If household resources exceed $75,000 for a single return or $150,000 for a joint return, the $20,000/$40,000 exemption is eliminated. The exemption also is eliminated if a taxpayer claims a deduction for a military or railroad pension. This will affect about 230,000 returns.

• Residents born after 1952 will see all retirement income taxed as regular income until they turn 67, at which point they'll qualify for a senior income exemption of $20,000 for single filers and $40,000 for joint filers on all income. If household resources exceed $75,000 for a single return or $150,000 for a joint return, the $20,000/$40,000 exemption is eliminated. A taxpayer can forgo the $20,000/$40,000 exemption and instead deduct 100 percent of Social Security income. A taxpayer claiming the $20,000/$40,000 exemption can't claim the deduction for Social Security or the standard personal exemption. This will affect about 150,000 returns.

Sources: Senate Fiscal Agency, Treasury Department

Things to Consider

"The Great Lakes State offers generous retirement-income exemptions from state income tax. It does not tax Social Security or military, federal, state- or local-government pensions. Private pensions are exempt up to $45,120 for individuals and up to $90,240 for married couples filing jointly. (However, these private-pension exemptions are reduced by any public-pension deduction that you claim.) The state's flat-rate income tax is scheduled to gradually decline to 3.9% by 2015. Food and prescription drugs are exempt from state sales taxes." (MSN Money Central)

Michigan Retirement

Renaissance Zones

Important Michigan Pension Tax Law Changes to Know About

Things to Consider

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