Tax Tip #8 for Tax Professionals - Understanding household income for the Property Tax Refund

Household income, along with property taxes or rent paid, affects your clients’ eligibility for the Homestead Credit Refund (for Homeowners) and Renter’s Property Tax Refund (Form M1PR).

 

Household income is adjusted gross income plus other nontaxable income received during the year. If your clients are required to file Schedule M1NC, Federal Adjustments, amounts from this schedule may impact household income.

Here are some common examples of nontaxable income to include in total household income:

• acquisition or abandonment of property gain (reported on federal Form 1099-A) not included in your federal income
• adoption assistance - subsidy payments as well as employer paid expenses
• canceled, discharged, or forgiven debt that was not included in your federal adjusted gross income, excluding any amount on line 4 of Schedule M1NC
• Community Access for Disability Inclusion Waivers
• contributions to deferred compensation plans such as 401(k), 403(b), 457 deferred compensation, or SIMPLE/SEP plans
• contributions to dependent care accounts and medical expense accounts
• disability benefits
• distributions from a ROTH or traditional IRA not included on line 1, including distributions made to charity and excluded from income
• employer-paid education expenses
• federal adjustments to income for contributions to IRA, Keogh, and SIMPLE/SEP plans
• federally nontaxed interest and mutual fund dividends
• foreign earned income exclusion
• foster care payments, including adult foster care
• gain on the sale of your home excluded from federal income
• G.I. Bill funding, including scholarships
• housing allowance for military or clergy
• income excluded by tax treaty
• long-term care benefits received
• lump-sum distribution reported on line 1 of Schedule M1LS, Tax on Lump-Sum Distribution
• Medicaid Home and Community-Based Services Waiver program payments
• Medicare Part B Premiums
• nontaxable Compensated Work Therapy (CWT) payments
• nontaxable employee transit and parking expenses
• nontaxable military earned income, such as combat zone pay
• nontaxable pension and annuity payments, including disability payments
• nontaxable personal injury or other settlement income
• nontaxable scholarships, fellowships, grants for education, including those from foreign sources, and tuition waivers or reductions
• ParentPay payments
• pretax medical and dental premiums
• Public Safety Officer medical insurance exclusion
• reduction in rent for caretaking responsibilities, include the amount shown on a Certificate of Rent Paid
• sick pay
• strike benefits
• VEBA contributions made by the employee
• veterans’ benefits including Special Monthly Compensation (SMC)
• worker’s compensation benefits

Also include the following losses and deductions to the extent they reduced federal adjusted gross income: 

• capital loss carryforward (use Worksheet 4 on page 26 to compute amount)
• educator expenses and tuition and fees deductions
• health savings account, domestic production activities, and Archer MSA deductions
• net operating loss carryforward/carryback
• passive activity losses in current year in excess of current year passive activity income, including rental losses, even if actively involved in real estate
• prior year passive activity loss carryforward claimed in 2018 for federal purposes

 

For a list of items not to include, see pages 8 and 9 of the 2018 Form M1PR instructions.