Federal adjusted gross income of individuals, estates and trusts, with certain adjustments.

Additions include all or part of (1) interest income from state/local obligations other than Michigan, and certain other exclusions from federal adjusted gross income, and (2) refunds received under the Michigan Education Trust Act for a terminated advance tuition payment contract.

Subtractions include personal and dependency exemptions indexed to inflation ($3,300 for 2006), special exemptions for dependents ($600 per child under 19 years of age), the handicapped, senior citizens, and certain unemployment compensation recipients ($2,100 for 2006). Also excluded are all or part of:

1. interest income from federal government obligations;
2. armed forces compensation;
3. public retirement or pension benefits; private retirement or pension benefits limited to $40,920 for the 2006 tax year ($81,840 for a joint return); limits are indexed each year;
4. political contributions up to $50 ($100 for a joint return);
5. advance tuition payments made under the State Education Trust Act;
6. up to $9,128 ($18,255 for a joint return) of interest, dividends, or capital gains earned by a senior citizen: maximum deduction reduced by pension deduction claimed, limits are indexed each year;
7. claims for recovered assets received by Holocaust victims;
8. educational savings account contributions up to $5,000 ($10,000 for a joint return) and interest earned on those contributions;
9. income earned and interest, dividends, and capital gains received by residents of a renaissance zone. Special provisions exist for estates and trusts.
10. distribution of assets to a qualified charitable organization not more than 60 days after the taxpayer received the assets from a retirement or pension plan;
11. gain from an initial equity investment of at least $100,000, if the invetment plus the gain, or a portion of it, is reinvested in an equity investment in a "qualifited business". The deduction is available after 2006 and the initial equity investment has to be made before 2010.

Credits against tax liability as follows:

1. Homestead property taxes. Limited to $1,200, figured as follows:
   1. general taxpayers -- 60% of taxes in excess of 3.5% of household income;
      
   2. senior citizens, paraplegic, hemiplegic, quadriplegic, or is totally and permanently disabled or deaf -- 100% of taxes in excess of 0 to 3.5% of household income, varying with size of household income;
      
   3. special computations for certain servicemen, veterans or their spouses, blind persons, farmers, and senior citizens whose rent exceeds a certain percent of income.
      
      
2. Property taxes on rented homesteads assumed to equal 20% of gross rent paid (10% in certain subsidized housing projects). Credit reduced by proportion of income from welfare. Credit reduced by 10% at $73,650 income and by another 10% for each $1,000 of income thereabove.
   
   
3. Farmland property taxes. Available to farmers who have entered into an agreement not to develop their land for another use for a minimum of 10 years. For individuals, partnerships, S corporations and grantor trusts, credit is 150% of taxes in excess of 7% of household income.
   
   
4. City income taxes.
   
   

   Tax Paid:	Credit Received:
   $100 or less	20% of tax paid
   $100.01-$150	$20 plus 10% of amount over $100
   Over $150	$25 plus 5% of amount over $150 (up to $10,000)

   
   
5. Earned Income. Refundable credit, equal to 10% of the Federal Earned Income Tax Credit (EITC). To qualify for the Federal EITC, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a return.
6. Contributions. Limited to lesser of 50% of qualifying gifts or $100 ($200 on joint returns; $5,000 for estates or trusts):
   1. Michigan colleges, universities, public broadcast stations, public libraries, artwork, state museums or archives,
      
   2. community foundations,
      
   3. food banks and shelters for homeless persons.
   
   
7. Expenditures made for rehabilitation of a historic resource. Equal to 25% of qualified expenditures reduced by the credit received under section 47(a)(2) of the internal revenue code.
   
   
8. Income tax paid to another state.
   
   
9. Home heating costs for low-income families (excluding dependent full-time students). Credit varies with household income, number of exemptions, and heating costs.
   
   
10. Donated Automobiles. A nonrefundable credit is available for automobiles donated to a charitable organization that intends to provide the automobile to a qualified recipient. A qualified recipient is generally an employed person receiving public assistance and without access to public transportation to travel to and from work. The credit is limited to the lesser of half the value determined by the organization or an appropriate appraisal guide published by the National Automobile Dealers Association. The credit is capped at $50 for a single return and $100 for a joint return and is effective for tax years beginning after December 31, 2004 and before January 1, 2010.
    
    
11. College tuition tax credit. Limited to returns with adjusted gross income less than $200,000. In order to qualify for the credit a Michigan college or university must not have increased tuition and fees by more than the percent increase in the United States Consumer Price Index in the previous tax year. The credit per student is the lesser of 8% of the tuition and fees paid to attend a qualifying Michigan college or university or $375.
    
    
12. Adoption expenses. Refundable credit, up to $1,200 per child, for qualified adoption expenses.
    
    
13. The difference between the amount repaid by the Michigan Early Stage Venture Capital Investment Fund and the negotiated repayment amount if the fund could not repay the negotiated return on a person's investment. This difference is issued to a person in the form of a tax voucher that may be used to pay any tax liability. Any amount of a voucher not used in one year may be used in subsequent years to satisfy any tax liability. The vouchers are available after 2008 and before 2020.
    
    
14. Stillbirth. Refundable credit, equal to 4.5% of the personal exemption, in a tax year where the taxpayer has a certificate of stillbirth from the Department of Community Health.
    
    
15. Individual or Family Development Account. Nonrefundable credit, equal to 75% of the contribution a taxpayer makes to a reserve fund associated with an Individual or Family Development Account.