2012 Retirement Income Taxable in Michigan

In 2012, the Michigan Individual Income Tax is changing.  Prior to 2012, all public retirement income was exclude from Michigan taxable income tax, and up to $45,120 for single and $90,240 for married of non-public retirement income was excluded from Michigan taxable income.

The Michigan Tax Reform MBT Repeal and Replacement Act changed how retirement income is treated for Michigan income tax purposes.  Other changes in this area impact social security benefits and the subtraction of interest and dividends for seniors.

However, there is no simple way to tell you how much, or if any, of these items may be subject to tax.  As with most tax law it is written in legalize.  The following is a simplified summary.


                              Taxable over the threshold of:


Year of Birth

Before 1946

1946 to 1952

After 1952

Social Security




Subtract interest, dividends, cap gains


Limited by other factors


No subtraction


No subtraction

Public Pensions

Tax free

See below

See below

Private Pensions

Excess over

$45,120 S

$90,240 M



See below



See below

Public and Private Pensions

After age 67


Excess over $20,000 S, $40,000 M.


All taxable to age 67

At 67 election

  1. Social security is taxable for the excess over $20,000 S,

           $40,000 M



Or 2. Elect to exempt Social Security, Military & Railroad Pensions. 


Retirement income used to be an easy concept to deal with on your Michigan Income Tax Return.  Now it has become very complicated and will take some time until you feel that you really have a grasp on it.  This change takes place January 1, 2012.  Retirement plan fiduciaries have been notified of this change.  They will be contacting you now to ask you to tell them the amount of Michigan withholding that they should be deducting from your retirement distributions.  Please contact your ShindelRock tax professional to assist you with your specific facts and circumstances.