TaxAct automatically transfers the taxable social security benefits from the federal return to the Michigan return (Line 14 of Michigan Schedule 1). However, since the program cannot determine if a retirement or pension benefit qualifies to be a subtraction on the Michigan return, the taxpayer must enter the amount qualifying for the subtraction.
To enter or review the retirement subtraction information:
- From within your TaxAct return (Online or Desktop), click State, then click Michigan (or MI). On smaller devices, click in the upper left-hand corner, then click State.
- Click Subtractions in the Michigan Quick Q&A Topics menu to expand, then click Retirement Subtraction.
- Continue with the interview process to enter all of the appropriate information.
- On the screen titled Michigan - Retirement Subtraction, click Yes to enter or review the applicable information regarding a deceased spouse.
- On the second screen titled Michigan - Retirement Subtraction, click Yes to enter or review the additional required information.
- On the screen title Michigan - Michigan Copies of Form 1099-R, click Continue to complete this section of the Q&A.
Form 4884 will now be completed within the return, if applicable, and you should see the retirement subtraction on Schedule 1, Line 24 which transfers to Form MI-1040, Line 13.
Additional Information
Per Form MI-1040 instructions, on page 17:
Which Benefits are Taxable
Retirement and Pension benefits are taxed differently depending on the age of the recipient. Married couples filing a joint return should complete Form 4884 based on the year of birth of the older spouse. Military and Michigan National Guard pensions, railroad retirement benefits and Social Security benefits are exempt from tax and should be reported on the Schedule 1, line 11 or line 14.
Who May Claim a Pension Subtraction
Tier 1
- Recipients born before 1946 may subtract all qualifying retirement and pension benefits received from federal or Michigan public sources, and may subtract qualifying private retirement and pension and benefits up to $53,759 if single or married filing separate, or $107,517 if married filing a joint return. If your public retirement benefits are greater than the maximum amount, you are not entitled to claim an additional subtraction for private pensions.
NOTE: In addition to the public retirement benefits listed above, the private pension limits are also reduced by the following from Schedule 1, line 11:
- Military retirement from the U.S. Armed Forces
- Retirement from the Michigan National Guard
- Railroad retirement.
Tier 2
- Recipients born during the period January 1, 1946 through December 31, 1952, do not complete Form 4884. See the Tier 2 Michigan Standard Deduction on Schedule 1, line 23.
Tier 3
- Recipients born after January 1, 1954 but before January 2, 1959 who have reached age 62 and receive retirement benefits from employment exempt from Social Security may deduct up to $15,000 in qualifying retirement and pension benefits. If both spouses on a joint return receive Social Security exempt retirement benefits, the maximum deduction increases to $30,000. See Form 4884, line 29 instructions for more information.
- Recipients born after January 1, 1954, received retirement benefits from SSA exempt employment, and were retired as of January 1, 2013 may deduct up to $35,000 in qualifying retirement and pension benefits if single or married filing separately or $55,000 if married filing a joint return. If both spouses on a joint return qualify, the maximum deduction increases to $70,000.
- All other recipients born after January 1, 1954, all retirement and pension benefits are taxable and you are not entitled to a pension subtraction.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.