Michigan Income Tax Changes for Retirement Benefits


Michigan Income Tax Changes for Retirement Benefits

The changes went into effect January 1st 2012.

 

I have clients ask me all of the time what were the changes, and my answer is well let me pull out my cheat sheet. The changes depend on when you were born, or when your spouse was born if you are married filing joint and your spouse is older than you.

 

Below I have created a chart that makes it a little easier to understand.

 

Taxpayers born before 1946

 

No changes in current law.

 

  • Social Security is exempt.
  • Senior citizen subtraction for interest, dividends, and capital gains is unchanged.
  • Public pensions are exempt.
  • For 2012 Private pensions subtract up to $47,309 for single filers and $94,618 for joint filers.

    

 

Taxpayers born 1946 to 1952

 

Before the taxpayer reaches age 67

 

  • Social Security is exempt.
  • Railroad pensions are exempt.
  • Military pensions are exempt.
  • Not eligible for the senior citizen subtraction for interest, dividends and capital gains.
  • Public and private pension limited subtraction of $20,000 for single filers or $40,000 for joint filers.

 

After the taxpayer reaches age 67

{Which will first occur in 2013}

 

  • Social Security is exempt.
  • Railroad pension is exempt (but see below).
  • Military pension is exempt (but see below).
  • Not eligible for senior citizen subtraction for interest, dividends and capital gains.
  • Subtraction against all income of $20,000 for single filers and $40,000 for joint filers.

Not eligible for this income subtraction if choosing to claim a military or tier 2 railroad pension    exemption.                                               

 

Taxpayers born after 1952

 

Before the taxpayer reaches age 67

 

  • Social Security is exempt.
  • Railroad pension are exempt.
  • Military pension are exempt.
  • Not eligible for the senior citizen subtraction for interest, dividends and capital gains.
  • Not eligible for public or private pension subtraction.

 

After the taxpayer reaches age 67

{Which will first occur in 2020}

 

  • Not eligible for senior citizen subtraction for interest, dividends, and capital gains.
  • Not eligible for public or private pension subtraction.
  • Income exemption election
  • ELECT exemption against all income of $20,000 for single filers or $40,000 for joint      filers.
  • No exemption for Social     Security, military or              Railroad retirement.
  • No personal exemptions.

         OR           

      
ELECT to exempt Social Security,
Military and railroad pension.

 
May claim personal exemptions.

 

 

So as you can see a cheat sheet comes in handy.

 

As always when you have a question call your tax accountant.

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