Michigan - Retirement Pension Subtraction

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:

  1. From within your TaxAct return (Online or Desktop), click State. On smaller devices, click the menu icon in the upper left-hand corner, then select State.  
  2. Click Michigan in the expanded State menu. 
  3. Click Subtractions to expand the category, then click Retirement Subtraction
  4. On the screen titled Michigan - Retirement Subtraction, click Yes to enter or review the applicable information regarding a deceased spouse
  5. On the next screen titled Michigan - Retirement Subtraction, click Yes to enter or review the additional required information
  6. On the following screen, you will see a list of Form(s) 1099-R transferred from the Federal return. Click Review for each form that pertains to the allowable subtraction.
  7. 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.
  8. 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 25 which transfers to Form MI-1040, Line 13.

Additional Information:

Per the Form MI-1040 instructions, page 14:

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 the Michigan Pension Schedule (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

  • 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 $49,861 if single or married filing separate, or $99,723 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. 

    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.
  • Recipients born during the period January 1, 1946 through January 1, 1950, do not complete Form 4884. See Schedule 1, line 24.
  • Recipients born after January 1, 1950 through December 31, 1952 will be able to deduct up to $20,000 in qualifying pension and retirement benefits if single or married filing separate or up to $40,000 if married filing a joint return. Generally, all pension or retirement benefits (public and private) are treated the same unless the recipient also has significant benefits from service in the U.S. Armed Forces or Michigan National Guard, or receives taxable railroad retirement benefits. Recipients who deduct military retirement benefits due to service in the U.S. Armed Forces or Michigan National Guard, or taxable railroad retirement benefits on Schedule 1, line 11 may have lower deduction limits if these deductions total more than $29,861 on a single return or $59,723 on a joint return. See the instructions for line 16 or 27 of Form 4884, whichever applies, for more information. 
  • Recipients born on or after January 1, 1953 but before January 2, 1955 who have reached age 62 and receive retirement benefits from employment exempt from Social Security may deduct up to $15,000 in qualifying pension and retirement 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 28 instructions for more information.
  • All other Recipients born after 1952, all pension and retirement benefits are taxable and you are not entitled to a pension subtraction.