Update Michigan 2025 Individual Income Tax Model

## Summary
Update Michigan income tax implementation for tax year 2025, including parameter value updates, adding 2025 references to all parameters, and creating 2025-specific tests.

## Background
Michigan's 2025 tax forms and instructions have been released. Key changes include updated exemption amounts and credit thresholds, while the income tax rate remains at 4.25%. The expanded retirement benefits deduction continues its phase-in with 75% deductibility for 2025 (already in parameters).

## Parameters Requiring 2025 Value Updates

### 1. Exemptions

| Parameter File | 2024 Value | 2025 Value | Reference |
|---------------|-----------|-----------|-----------|
| `exemptions/personal.yaml` | $5,600 | $5,800 | [MI-1040 Instructions p.3](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=3) |
| `exemptions/disabled/amount/base.yaml` | $3,300 | $3,400 | [MI-1040 Instructions p.3](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=3) |
| `exemptions/disabled/amount/veteran.yaml` | $500 | $500 (verify) | [MI-1040 Instructions p.3](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=3) |

### 2. Homestead Property Tax Credit

| Parameter File | 2024 Value | 2025 Value | Reference |
|---------------|-----------|-----------|-----------|
| `credits/homestead_property_tax/property_value_limit.yaml` | $160,700 | $165,400 | [MI-1040CR Instructions](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf) |
| `credits/homestead_property_tax/cap.yaml` | $1,800 | ~$1,900 (verify) | [MI-1040CR Form](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040CR.pdf) |
| `credits/homestead_property_tax/reduction/start.yaml` | $60,700 | ~$62,700+ (verify) | [MI-1040 Instructions Table B](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf) |
| `credits/homestead_property_tax/exemption/non_senior_disabled.yaml` | - | - | Add 2025 reference |
| `credits/homestead_property_tax/exemption/senior_disabled.yaml` | - | - | Add 2025 reference |

### 3. Home Heating Credit (MI-1040CR-7)

| Parameter File | Updates Needed | Reference |
|---------------|---------------|-----------|
| `credits/home_heating/standard/base.yaml` | Add 2025 brackets by exemption count | [MI-1040CR-7 Instructions Table A](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/BOOK_MI-1040CR-7.pdf) |
| `credits/home_heating/alternate/household_resources/cap.yaml` | Add 2025 thresholds | [MI-1040CR-7 Instructions Table B](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/BOOK_MI-1040CR-7.pdf) |
| `credits/home_heating/alternate/heating_costs/cap.yaml` | Add 2025 values | [MI-1040CR-7 Instructions](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/BOOK_MI-1040CR-7.pdf) |

### 4. Retirement Benefits Deductions

| Parameter File | Updates Needed | Reference |
|---------------|---------------|-----------|
| `deductions/retirement_benefits/tier_one/amount.yaml` | Add 2025 uprated values | [MI-1040 Instructions p.20](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=20) |
| `deductions/retirement_benefits/tier_three/ss_exempt/retired/*.yaml` | Add 2025 reference | [MI-1040 Instructions p.20](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=20) |
| `deductions/retirement_benefits/tier_three/ss_exempt/not_retired/*.yaml` | Add 2025 reference | [MI-1040 Instructions p.20](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=20) |
| `deductions/retirement_benefits/expanded/rate.yaml` | Already has 0.75 for 2025 | [MI-1040 Instructions p.25](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=25) |
| `deductions/retirement_benefits/expanded/birth_year.yaml` | Already has 1967 threshold | [MI-1040 Instructions p.16](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=16) |

## Parameters Requiring Only 2025 Reference (No Value Change)

| Parameter File | 2025 Value | Reference Needed |
|---------------|-----------|-----------------|
| `rate.yaml` | 4.25% | [MI-1040 Instructions p.3](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=3) |
| `credits/eitc/match.yaml` | 30% | [MI-1040 Instructions p.11](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=11) |
| `deductions/standard/tier_two/amount/base.yaml` | $20,000/$40,000 | [MI-1040 Instructions p.17](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=17) |
| `deductions/standard/tier_three/amount.yaml` | $20,000/$40,000 | [MI-1040 Instructions p.17](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=17) |
| `exemptions/dependent_on_other_return.yaml` | $1,500 | [MI-1040 Instructions p.10](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=10) |
| `household_resources.yaml` | (no change) | [MI-1040 Instructions p.31](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf#page=31) |

## Testing Requirements

### New Tests Needed
- [ ] Create 2025-specific integration tests for each credit/deduction program
- [ ] Test homestead property tax credit with 2025 thresholds
- [ ] Test home heating credit with 2025 standard allowance amounts
- [ ] Test expanded retirement benefits at 75% deduction rate
- [ ] Verify personal exemption of $5,800 in calculations

### Test Files to Update
- `tests/gov/states/mi/tax/income/exemptions/mi_personal_exemptions.yaml`
- `tests/gov/states/mi/tax/income/credits/homestead_property_tax/*.yaml`
- `tests/gov/states/mi/tax/income/credits/home_heating/*.yaml`
- `tests/gov/states/mi/tax/income/deductions/retirement/*.yaml`

## New Programs Considered

### Not Yet Enacted (Do Not Implement)
1. **Working Parent Tax Credit (SB 838)** - Proposed but not law as of 2025
2. **$5,500 Child Tax Credit** - Proposed by Sen. Kevin Hertel but not enacted

These should be monitored but not implemented until enacted.

## Implementation Checklist

- [ ] Update all exemption amounts with 2025 values and references
- [ ] Update homestead property tax credit parameters
- [ ] Update home heating credit standard allowance table
- [ ] Update home heating credit alternate pathway thresholds
- [ ] Update tier one retirement deduction amounts (uprated)
- [ ] Add 2025 references to ALL parameter files (even if values unchanged)
- [ ] Create integration tests for 2025 tax year
- [ ] Run full test suite to verify no regressions
- [ ] Run `make format` before committing

## Official Sources

- [2025 MI-1040 Instructions (PDF)](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf)
- [2025 MI-1040 Form (PDF)](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040.pdf)
- [2025 MI-1040CR Form (PDF)](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040CR.pdf)
- [2025 Withholding Guide (PDF)](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/SUW/TY2025/446_Withholding-Guide_2025.pdf)
- [Michigan Income Tax Act MCL 206](http://www.legislature.mi.gov/documents/mcl/pdf/mcl-act-281-of-1967.pdf)
- [Michigan Retirement and Pension Benefits](https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits)


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Update Michigan 2025 Individual Income Tax Model #7120

Summary

Background

Parameters Requiring 2025 Value Updates

1. Exemptions

2. Homestead Property Tax Credit

3. Home Heating Credit (MI-1040CR-7)

4. Retirement Benefits Deductions

Parameters Requiring Only 2025 Reference (No Value Change)

Testing Requirements

New Tests Needed

Test Files to Update

New Programs Considered

Not Yet Enacted (Do Not Implement)

Implementation Checklist

Official Sources

Metadata

Assignees

Labels

Type

Projects

Milestone

Relationships

Development

Parameter File	2024 Value	2025 Value	Reference
`exemptions/personal.yaml`	$5,600	$5,800	MI-1040 Instructions p.3
`exemptions/disabled/amount/base.yaml`	$3,300	$3,400	MI-1040 Instructions p.3
`exemptions/disabled/amount/veteran.yaml`	$500	$500 (verify)	MI-1040 Instructions p.3

Parameter File	2024 Value	2025 Value	Reference
`credits/homestead_property_tax/property_value_limit.yaml`	$160,700	$165,400	MI-1040CR Instructions
`credits/homestead_property_tax/cap.yaml`	$1,800	~$1,900 (verify)	MI-1040CR Form
`credits/homestead_property_tax/reduction/start.yaml`	$60,700	~$62,700+ (verify)	MI-1040 Instructions Table B
`credits/homestead_property_tax/exemption/non_senior_disabled.yaml`	-	-	Add 2025 reference
`credits/homestead_property_tax/exemption/senior_disabled.yaml`	-	-	Add 2025 reference

Parameter File	Updates Needed	Reference
`credits/home_heating/standard/base.yaml`	Add 2025 brackets by exemption count	MI-1040CR-7 Instructions Table A
`credits/home_heating/alternate/household_resources/cap.yaml`	Add 2025 thresholds	MI-1040CR-7 Instructions Table B
`credits/home_heating/alternate/heating_costs/cap.yaml`	Add 2025 values	MI-1040CR-7 Instructions

Parameter File	Updates Needed	Reference
`deductions/retirement_benefits/tier_one/amount.yaml`	Add 2025 uprated values	MI-1040 Instructions p.20
`deductions/retirement_benefits/tier_three/ss_exempt/retired/*.yaml`	Add 2025 reference	MI-1040 Instructions p.20
`deductions/retirement_benefits/tier_three/ss_exempt/not_retired/*.yaml`	Add 2025 reference	MI-1040 Instructions p.20
`deductions/retirement_benefits/expanded/rate.yaml`	Already has 0.75 for 2025	MI-1040 Instructions p.25
`deductions/retirement_benefits/expanded/birth_year.yaml`	Already has 1967 threshold	MI-1040 Instructions p.16

Parameter File	2025 Value	Reference Needed
`rate.yaml`	4.25%	MI-1040 Instructions p.3
`credits/eitc/match.yaml`	30%	MI-1040 Instructions p.11
`deductions/standard/tier_two/amount/base.yaml`	$20,000/$40,000	MI-1040 Instructions p.17
`deductions/standard/tier_three/amount.yaml`	$20,000/$40,000	MI-1040 Instructions p.17
`exemptions/dependent_on_other_return.yaml`	$1,500	MI-1040 Instructions p.10
`household_resources.yaml`	(no change)	MI-1040 Instructions p.31

Update Michigan 2025 Individual Income Tax Model #7120

Description

Summary

Background

Parameters Requiring 2025 Value Updates

1. Exemptions

2. Homestead Property Tax Credit

3. Home Heating Credit (MI-1040CR-7)

4. Retirement Benefits Deductions

Parameters Requiring Only 2025 Reference (No Value Change)

Testing Requirements

New Tests Needed

Test Files to Update

New Programs Considered

Not Yet Enacted (Do Not Implement)

Implementation Checklist

Official Sources

Metadata

Metadata

Assignees

Labels

Type

Projects

Milestone

Relationships

Development

Issue actions