One of the first actions of the new Democratic trifecta was enacting the Lowering MI Costs Plan, part of which included repealing the 2012 tax on Michiganders’ retirement. Repealing the retirement tax provides an estimated 500,000 retirees with an average of $1000 in tax relief. Although subject to a temporary 4-year phase-in period beginning tax year 2023, this new law essentially restores the pre-2012 retirement and public and private pension subtraction for most taxpayers in Michigan beginning in 2026. This law change will ultimately benefit most retirees in Michigan while ensuring that taxpayers in unique circumstances are not harmed.
The phase in of this retirement tax repeal began on Feb. 13. The Treasury will address impacted returns submitted prior to this date and prepare them for release so that eligible retirees can claim the most advantageous pension and retirement benefit subtraction.
Please go to michigan.gov/taxes/iit/retirement-and-pension-benefits for more information.