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 on the State Q&A tab
- Click Michigan directly below the blue tabs
- Click Subtractions to expand the category, then click Retirement subtraction
- On the screen titled Michigan - Retirement Subtraction, click Yes to enter or review the applicable information regarding a deceased spouse
- On the screen titled Michigan - Retirement Subtraction - 2, click Yes to enter or review the additional required information
- On the following screen, you will see a list of Forms 1099-R transferred from the Federal return. Click Review for each form that pertains to the allowable subtraction.
- For each form, verify the Federal EIN, indicate whether the distribution is from a Private or Public source, and enter the amount that qualifies for the retirement subtraction. Click Continue when you are done entering the applicable information.
- Once back to the Michigan - Michigan Copies of Form 1099-R screen, 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 12 which transfers to Form MI-1040, Line 13.
Starting with the 2012 tax year, Michigan has implemented significant retirement/pension subtraction changes based on the taxpayer's filing status and year of birth.
Per the Form MI-1040 instructions, page 14:
Which Benefits are Taxable
Beginning in 2012, pension and retirement benefits will be taxed differently depending on the age of the recipient. Married couples filing a joint return should complete the Michigan Pension Schedule (Form 4884) based on the year of birth of the older spouse. Military and Michigan National Guard pensions, Social Security benefits and railroad retirement benefits continue to be exempt from tax.
Who May Claim a Pension Subtraction
- Recipients born before 1946 may subtract all qualifying pension and retirement benefits received from public sources, and may subtract qualifying private pension and retirement benefits up to $48,302 if single or married filing separate, or $96,605 if married filing a joint return. If your public retirement benefits are greater than the maximum amounts you are not entitled to claim a subtraction for private pensions.
- Recipients born in 1946, do not complete Form 4884. See Schedule 1, line 24.
- Recipients born during the period 1947 through 1952 will be able to deduct up to $20,000 in pension and retirement benefits if single or married filing separate or up to $40,000 if married filing a joint return. All pension or retirement benefits (public and private) are treated the same.
- Recipients born after 1952, all pension and retirement benefits are taxable and you are not entitled to a pension subtraction.
Table A: Maximum Allowable Pension Deduction
Year of Birth
Single or Married Filing Separately
Married Filing Jointly
Prior to 1/1/1946
1/1/1946 - 12/31/1952
On or after 1/1/1953
For additional information, see the Michigan Individual Income Tax Instructions (the Form 4884 instructions begin on page 15) and the Summary of Income Tax Changes for Retirement Benefits.