Michigan Income Tax – Changes to the Pension Exclusion

Taxpayers will be classified into one of three categories :

  • Born before 1946- same treatment of retirement and Social Security income as in prior law.
  • Born 1946 – 1952 may take an exemption of $20,000 for a single return and $40,000 for a joint return against retirement income until age 67 when they may take that same exemption amount against all types of income.
  • Born after 1952 – no exemption for retirement income until age 67, except for the Social Security.  At 67,

(1)              the taxpayer has a choice between the $20,000/40,000 exemption against all types of income, with no personal exemptions and with no additional exemption for Social Security
or

(2)              continuing the exemption for Social Security, along with the personal exemptions for which they are eligible.

The $20,000/$40,000 exemption is not available when total household resources exceed $75,000 single $150,000 MFJ.

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