Zichterman & Clark Capital Management of Raymond James & Associates, Inc.

News & Events

Michigan’s Tax Law Changes

In May, Governor Snyder signed into law an eight-bill package, a portion of which, will change the way that retirement income is taxed in the state of Michigan. The chart below illustrates the details of the new tax law.

Born After 1952

  • Income taxed at 4.35% (4.25% starting Jan. 1, 2013)
  • Retirement income will be taxed at 4.35% (4.25% starting Jan. 1, 2013) "Retirement Income" includes public pensions, private pensions, 401(k)s and IRAs
  • Social Security will NOT be taxed
  • Personal exemption of $3,700 per person*
  • Military pensions will NOT be taxed
  • When people born after 1952 turn 67, they qualify for senior income exemption of $20,000 for single filers and $40,000 for joint filers, regardless of income source

    IF the Social Security exemption plus the personal exemption is more than the senior income exemption, the filer takes the better of the two options

Born January 1, 1946 to December 31, 1952

  • Income taxed at 4.35% (4.25% starting Jan. 1, 2013)
  • Retirement income up to $20,000 for single filers and $40,000 for joint filers will NOT be taxed "Retirement Income" includes public pensions, private pensions, 401(k)s and IRAs - Retirement income above these exemption levels will be taxed at 4.35% (4.25% starting Jan 1, 2013)
  • Social Security will NOT be taxed
  • Personal exemption of $3,700 per person*
  • Military pensions will NOT be taxed
  • When people born between January 1, 1946 to December 31, 1952 turn 67, they qualify for senior income exemption of $20,000 for single filers and $40,000 for joint filers, regardless of income source - This is ON TOP OF the exemption for Social Security and personal exemption

Born before 1946

  • Income taxed at 4.35% (4.25% starting Jan. 1, 2013)
  • Private pensions will NOT be taxed if under the current exemption threshold of $45,120 for single filers and $90,240 for joint filers.* Public pensions will NOT be taxed.  401(k)s and IRAs will be treated the same as under current law.
  • Social Security will NOT be taxed
  • Personal exemption of $3,700 per person*
  • Military pensions will NOT be taxed

* Indexed to inflation
Source: http://www.michigan.gov/documents/snyder/PensionTaxDetails_350246_7.pdf
As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision.