Will My Michigan Pension Get Taxed?
As you prepare for retirement, taxes may be top of mind. A 2011 change to taxation of Michigan pensions remains relevant for Michigan retirees today.
Under this law, your taxation is divided up based upon your birth year (Source: Michigan.gov website):
- Born before 1946: Your pension is not taxed by the state of Michigan.
- Born on or after 1/1/46 to 12/31/1952: Some of your pension gets taxed. You can subtract $20,000/$40,000 for married couple from your pension income to determine taxation. After age 67 (or for the oldest spouse if married), that reduction applies to all forms of income.
- Those born in 1953 or later: Your pension is subject to Michigan income tax until age 67 when they can subtract $20,000 from taxable income, if single, or $40,000 from taxable income for couples filing jointly.
Other considerations: There are a variety of factors that affect your retirement planning and taxes. Those can include your sources of income, planning on how you will access retirement savings such as what order will you spend out of taxable, tax-deferred and tax-exempt assets, Social Security claiming decisions and much more.
We always recommend that you review your personal retirement situation by updating your financial plan with a financial planner. If you have questions about your retirement preparedness or are looking to get serious about retirement, make use of the following resources:
- Retirement Readiness Webinar
- Tax Aware Investment Strategies Webinar
- Schedule a meeting to discuss your personal circumstances in context of your financial and retirement plan
This material is being provided for informational purposes only and does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Melissa Joy, CFP®, CDFA® is the President of Pearl Planning and a Wealth Advisor for Raymond James Financial Services. Reach out for a call today at 734.274.6744. Address: 8031 Main St. Suite 302 Dexter, MI 48130