Pa 116 benefits

1130Leo · Feb 8, 2017

May be a dumb question, but I can not seem to find a definate answer anywhere. Is there any benefit to put ones homestead acreage 80 acres into PA 116?
We have the homestead exemption, just wanting to know if there would be any benefit of putting it into PA 116? Would I save anything on taxes since it is already getting the homestead exemption?

rrlund · Feb 8, 2017

I don't know just how much the PA 116 exemption is anymore. It was pretty much a wash after 1994,but as taxes went back up,I think there must be some advantage. Even Ag land where you don't get principle residence exemption gets 18 mil Qualified Ag Exemption,same as P.R.E. Exemption and PA 116 still exists,so there must be an advantage. It's possible I suppose that the best use of PA 116 would be on land recently purchased and the cap came off vs land that you've owned and has been capped for a long time.

Dave H (MI) · Feb 8, 2017

OK, I will preface this by stating that it is years since I have done PA 116 credit form on a client tax return. The way it worked was very similar to the homestead property tax credit. Taxes on farmland were limited to 3.5% of household resources. Gets a little more complicated with interactions with the standard HPTC on 1040CR. That is about all I can tell you right now. It is best to work these things thru with your actual documents to see how it benefits you. Remember, you do have to enter into a contractual arrangement with SOM if you do this thing. If you have questions, shoot me an email and I will try to answer them...Dave H (MI CPA)

K Effective · Feb 8, 2017

We entered into PA116 with our homestead, and got tax money back the first two years. After that, our two-off-farm-income family made enough that the taxes we paid were less than the 3.5% of our adjusted gross. The worst part was that the tax program I used on the computer did not include the PA116 forms, so I had to either file paper returns or take my completed computer return to a tax preparer to e-file for me, since their program has the forms. On top of that, I was getting no benefit from the program.

I let it expire after ten years, and got a bill for part of the money we had received. I thought you only had to pay it back if you broke the contract, not letting it expire and not renewing. It was small enough, I just paid it and was glad to be done with it. More hassle than what is was worth.

YMMV

49716 · Feb 8, 2017

if you are over 65 and your taxes are not over $1200, probably not. I'm under 65 and taxes are thousands of dollars so it works well for me. that's a starting point, other factors will also apply.

1130Leo · Feb 9, 2017

Dave,

Thanks for the info, I will ask our CPA when we have our taxes done. Not sure if there is any benefit for us or not, knowing that we will never sell the farm and it will always be agricultural use as long as we live will have to consider if there are benefits.

rrlund · Feb 9, 2017

The one problem is,if somebody else in the family ever wants to build a house somewhere on it,it's tied up and a pain in the rear end to get an acre or two released.

Pa 116 benefits

1130Leo

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rrlund

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Dave H (MI)

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K Effective

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49716

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1130Leo

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rrlund

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