HB 4202

HOUSE BILL NO. 4202
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 30 (MCL 206.30), as amended by 2023
PA 4.
the people of the state of michigan enact:
Sec. 30. (1) "Taxable income"
means, for a person other than a corporation, estate, or trust, adjusted gross
income as defined in the internal revenue code subject to the following
adjustments under this section:
(a) Add gross
interest income and dividends derived from obligations or securities of states
other than Michigan, in the same amount that has been excluded from adjusted
gross income less related expenses not deducted in computing adjusted gross
income because of section 265(a)(1) of the internal revenue code.
(b) Add taxes on or
measured by income to the extent the taxes have been deducted in arriving at
adjusted gross income including any direct or indirect allocated share of taxes
paid by a flow-through entity under part 4.
(c) Add losses on
the sale or exchange of obligations of the United States government, the income
of which this state is prohibited from subjecting to a net income tax, to the
extent that the loss has been deducted in arriving at adjusted gross income.
(d) Deduct, to the
extent included in adjusted gross income, income derived from obligations, or
the sale or exchange of obligations, of the United States government that this
state is prohibited by law from subjecting to a net income tax, reduced by any
interest on indebtedness incurred in carrying the obligations and by any
expenses incurred in the production of that income to the extent that the
expenses, including amortizable bond premiums, were deducted in arriving at
adjusted gross income.
(e) Deduct, to the
extent included in adjusted gross income, the following:
(i) Compensation, including retirement or
pension benefits, received for services in the Armed Forces of the United
States.
(ii) Retirement or pension benefits under the
railroad retirement act of 1974, 45 USC 231 to 231v.
(iii) Beginning
January 1, 2012, retirement Retirement or
pension benefits received for services in the Michigan National Guard.
(f) Deduct the
following to the extent included in adjusted gross income subject to the
limitations and restrictions set forth in subsection (9), (10), or (11), as
applicable:
(i) Retirement or pension benefits received
from a federal public retirement system or from a public retirement system of
or created by this state or a political subdivision of this state.
(ii) Retirement or pension benefits received
from a public retirement system of or created by another state or any of its
political subdivisions if the income tax laws of the other state permit a
similar deduction or exemption or a reciprocal deduction or exemption of a
retirement or pension benefit received from a public retirement system of or
created by this state or any of the political subdivisions of this state.
(iii) Social Security benefits as defined in
section 86 of the internal revenue code.
(iv) Beginning on and after January 1, 2007,
retirement or pension benefits not deductible under subparagraph (i) or subdivision (e) from any other
retirement or pension system or benefits from a retirement annuity policy in
which payments are made for life to a senior citizen, to a maximum of
$42,240.00 for a single return and $84,480.00 for a joint return. The maximum
amounts allowed under this subparagraph shall be reduced by the amount of the
deduction for retirement or pension benefits claimed under subparagraph (i) or subdivision (e) and by the amount of
a deduction claimed under subdivision (p). For the 2008 tax year and each tax
year after 2008, the maximum amounts allowed under this subparagraph shall be
adjusted by the percentage increase in the United States Consumer Price Index
for the immediately preceding calendar year. The department shall annualize the
amounts provided in this subparagraph as necessary.
(v) The amount determined to be the section
22 amount eligible for the elderly and the permanently and totally disabled
credit provided in section 22 of the internal revenue code.
(g) Adjustments
resulting from the application of section 271.
(h) Adjustments
with respect to estate and trust income as provided in section 36.
(i) Adjustments
resulting from the allocation and apportionment provisions of chapter 3.
(j) Deduct the
following payments made by the taxpayer in the tax year:
(i) The amount of a charitable contribution
made to the advance tuition payment fund created under section 9 of the
Michigan education trust act, 1986 PA 316, MCL 390.1429.
(ii) The amount of payment made under an
advance tuition payment contract as provided in the Michigan education trust
act, 1986 PA 316, MCL 390.1421 to 390.1442.
(iii) The amount of payment made under a
contract with a private sector investment manager that meets all of the
following criteria:
(A) The contract is
certified and approved by the board of directors of the Michigan education
trust to provide equivalent benefits and rights to purchasers and beneficiaries
as an advance tuition payment contract as described in subparagraph (ii).
(B) The contract
applies only for a state institution of higher education as defined in the
Michigan education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, or a
community or junior college in Michigan.
(C) The contract
provides for enrollment by the contract's qualified beneficiary in not less
than 4 years after the date on which the contract is entered into.
(D) The contract is
entered into after either of the following:
(I) The purchaser
has had the purchaser's offer to enter into an advance tuition payment contract
rejected by the board of directors of the Michigan education trust, if the
board determines that the trust cannot accept an unlimited number of enrollees
upon an actuarially sound basis.
(II) The board of
directors of the Michigan education trust determines that the trust can accept
an unlimited number of enrollees upon an actuarially sound basis.
(k) If an advance
tuition payment contract under the Michigan education trust act, 1986 PA 316,
MCL 390.1421 to 390.1442, or another contract for which the payment was
deductible under subdivision (j) is terminated and the qualified beneficiary
under that contract does not attend a university, college, junior or community
college, or other institution of higher education, add the amount of a refund
received by the taxpayer as a result of that termination or the amount of the
deduction taken under subdivision (j) for payment made under that contract,
whichever is less.
(l) Deduct from the taxable income of a
purchaser the amount included as income to the purchaser under the internal
revenue code after the advance tuition payment contract entered into under the
Michigan education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, is
terminated because the qualified beneficiary attends an institution of
postsecondary education other than either a state institution of higher
education or an institution of postsecondary education located outside this
state with which a state institution of higher education has reciprocity.
(m) Add, to the
extent deducted in determining adjusted gross income, the net operating loss
deduction under section 172 of the internal revenue code.
(n) Deduct a net
operating loss deduction for the taxable year as determined under section 172
of the internal revenue code subject to the modifications under section
172(b)(2) of the internal revenue code and subject to the allocation and
apportionment provisions of chapter 3 for the taxable year in which the loss
was incurred.
(o) Deduct, to the
extent included in adjusted gross income, benefits from a discriminatory
self-insurance medical expense reimbursement plan.
(p) Beginning on
and after January 1, 2007, subject to any limitation provided in this
subdivision, a taxpayer who is a senior citizen may deduct to the extent
included in adjusted gross income, interest, dividends, and capital gains
received in the tax year not to exceed $9,420.00 for a single return and
$18,840.00 for a joint return. The maximum amounts allowed under this
subdivision shall be reduced by the amount of a deduction claimed for
retirement or pension benefits under subdivision (e) or a deduction claimed
under subdivision (f)(i), (ii), (iv), or (v). For the 2008 tax year and each tax year after 2008, the maximum
amounts allowed under this subdivision shall be adjusted by the percentage
increase in the United States Consumer Price Index for the immediately
preceding calendar year. The department shall annualize the amounts provided in
this subdivision as necessary. Beginning January 1, 2012, the deduction under
this subdivision is not available to a senior citizen born after 1945.
(q) Deduct, to the
extent included in adjusted gross income, all of the following:
(i) The amount of a refund received in the
tax year based on taxes paid under this part and any direct or indirect
allocated share of a refund received by a flow-through entity under part 4.
(ii) The amount of a refund received in the
tax year based on taxes paid under the city income tax act, 1964 PA 284, MCL
141.501 to 141.787.
(iii) The amount of a credit received in the
tax year based on a claim filed under sections 520 and 522 to the extent that
the taxes used to calculate the credit were not used to reduce adjusted gross
income for a prior year.
(r) Add the amount
paid by the state on behalf of the taxpayer in the tax year to repay the
outstanding principal on a loan taken on which the taxpayer defaulted that was
to fund an advance tuition payment contract entered into under the Michigan
education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, if the cost of the
advance tuition payment contract was deducted under subdivision (j) and was
financed with a Michigan education trust secured loan.
(s) Deduct, to the
extent included in adjusted gross income, any amount, and any interest earned
on that amount, received in the tax year by a taxpayer who is a Holocaust
victim as a result of a settlement of claims against any entity or individual
for any recovered asset pursuant to the German act regulating unresolved
property claims, also known as Gesetz zur Regelung offener Vermogensfragen, as
a result of the settlement of the action entitled In re: Holocaust victim
assets litigation, CV-96-4849, CV-96-5161, and CV-97-0461 (E.D. NY), or as
a result of any similar action if the income and interest are not commingled in
any way with and are kept separate from all other funds and assets of the
taxpayer. As used in this subdivision:
(i) "Holocaust victim" means a
person, or the heir or beneficiary of that person, who was persecuted by Nazi
Germany or any Axis regime during any period from 1933 to 1945.
(ii) "Recovered asset" means any
asset of any type and any interest earned on that asset, including, but not
limited to, bank deposits, insurance proceeds, or artwork owned by a Holocaust
victim during the period from 1920 to 1945, withheld from that Holocaust victim
from and after 1945, and not recovered, returned, or otherwise compensated to
the Holocaust victim until after 1993.
(t) Deduct all of
the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from education savings
accounts, calculated on a per education savings account basis, pursuant to the
Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486,
not to exceed a total deduction of $5,000.00 for a single return or $10,000.00
for a joint return per tax year. The amount calculated under this subparagraph
for each education savings account shall not be less than zero.
(ii) To the extent included in adjusted gross
income, interest earned in the tax year on the contributions to the taxpayer's
education savings accounts if the contributions were deductible under
subparagraph (i).
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from an education savings
account to the designated beneficiary of that education savings account.
(u) Add, to the
extent not included in adjusted gross income, the amount of money withdrawn by
the taxpayer in the tax year from education savings accounts, not to exceed the
total amount deducted under subdivision (t) in the tax year and all previous tax
years, if the withdrawal was not a qualified withdrawal as provided in the
Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.
This subdivision does not apply to withdrawals that are less than the sum of
all contributions made to an education savings account in all previous tax
years for which no deduction was claimed under subdivision (t), less any
contributions for which no deduction was claimed under subdivision (t) that
were withdrawn in all previous tax years.
(v) A taxpayer who
is a resident tribal member may deduct, to the extent included in adjusted
gross income, all nonbusiness income earned or received in the tax year and
during the period in which an agreement entered into between the taxpayer's
tribe and this state pursuant to section 30c of 1941 PA 122, MCL 205.30c, is in
full force and effect. As used in this subdivision:
(i) "Business income" means
business income as defined in section 4 and apportioned under chapter 3.
(ii) "Nonbusiness income" means nonbusiness
income as defined in section 14 and, to the extent not included in business
income, all of the following:
(A) All income
derived from wages whether the wages are earned within the agreement area or
outside of the agreement area.
(B) All interest
and passive dividends.
(C) All rents and
royalties derived from real property located within the agreement area.
(D) All rents and
royalties derived from tangible personal property, to the extent the personal
property is utilized within the agreement area.
(E) Capital gains
from the sale or exchange of real property located within the agreement area.
(F) Capital gains
from the sale or exchange of tangible personal property located within the
agreement area at the time of sale.
(G) Capital gains
from the sale or exchange of intangible personal property.
(H) All pension
income and benefits, including, but not limited to, distributions from a 401(k)
plan, individual retirement accounts under section 408 of the internal revenue
code, or a defined contribution plan, or payments from a defined benefit plan.
(I) All per capita
payments by the tribe to resident tribal members, without regard to the source
of payment.
(J) All gaming
winnings.
(iii) "Resident tribal member" means
an individual who meets all of the following criteria:
(A) Is an enrolled
member of a federally recognized tribe.
(B) The
individual's tribe has an agreement with this state pursuant to section 30c of
1941 PA 122, MCL 205.30c, that is in full force and effect.
(C) The
individual's principal place of residence is located within the agreement area
as designated in the agreement under sub-subparagraph (B).
(w) Eliminate all
of the following:
(i) Income from producing oil and gas to the
extent included in adjusted gross income.
(ii) Expenses of producing oil and gas to the
extent deducted in arriving at adjusted gross income.
(x) Deduct all of
the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from an ABLE savings
account, pursuant to the Michigan achieving a better life experience (ABLE)
program act, 2015 PA 160, MCL 206.981 to 206.997, not to exceed a total
deduction of $5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for an ABLE savings
account shall not be less than zero.
(ii) To the extent included in adjusted gross
income, interest earned in the tax year on the contributions to the taxpayer's
ABLE savings account if the contributions were deductible under subparagraph (i).
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from an ABLE savings
account to the designated beneficiary of that ABLE savings account.
(y) Add, to the
extent not included in adjusted gross income, the amount of money withdrawn by
the taxpayer in the tax year from an ABLE savings account, not to exceed the
total amount deducted under subdivision (x) in the tax year and all previous
tax years, if the withdrawal was not a qualified withdrawal as provided in the
Michigan achieving a better life experience (ABLE) program act, 2015 PA 160,
MCL 206.981 to 206.997. This subdivision does not apply to withdrawals that are
less than the sum of all contributions made to an ABLE savings account in all
previous tax years for which no deduction was claimed under subdivision (x),
less any contributions for which no deduction was claimed under subdivision (x)
that were withdrawn in all previous tax years.
(z) For tax years that begin after December 31, 2018, deduct,
Deduct, to the extent included in
adjusted gross income, compensation received in the tax year pursuant to the
wrongful imprisonment compensation act, 2016 PA 343, MCL 691.1751 to 691.1757.
(aa) For the 2016, 2017, 2018, and 2019 tax years and for each
tax year that begins on and after January 1, 2025, a taxpayer who is a disabled
veteran may deduct, to the extent included in adjusted gross income, income
reported on a federal income tax form 1099-C that is attributable to the
cancellation or discharge of a student loan by the United States Department of
Education pursuant to the total and permanent disability discharge program, 34
CFR 685.213. As used in this subdivision, "disabled veteran" means an
individual who meets either of the following criteria:
(i) Has been determined by the United States
Department of Veterans Affairs to be permanently and totally disabled as a
result of military service and entitled to veterans' benefits at the 100% rate.
(ii) Has been rated by the United States
Department of Veterans Affairs as individually unemployable.
(bb) For tax years
that begin on and after January 1, 2021, and subject to the limitation under
this subdivision, deduct, to the extent not deducted in determining adjusted
gross income, wagering losses deducted under section 165(d) of the internal
revenue code on the taxpayer's federal income tax return for the same tax year.
For a nonresident, only wagering losses that are attributable to wagering
transactions placed at or through a casino or licensed race meeting located in
this state may be deducted and must not exceed the gains on wagering
transactions allocated to this state under section 110(2)(d). As used in this
subdivision, "casino" and "licensed race meeting" mean
those terms as defined in section 110.
(cc) Except as
otherwise provided under subparagraph (i), for tax years that begin on and after January 1, 2022, deduct all of
the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from a first-time home
buyer savings account, pursuant to the Michigan first-time home buyer savings
program act, 2022 PA 6, MCL 565.1001 to 565.1013, not to exceed a total
deduction of $5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for a first-time home
buyer savings account shall not be less than zero. The deduction under this
subparagraph does not apply for tax years that begin after December 31, 2026.
(ii) To the extent not deducted in
determining adjusted gross income, interest earned in the tax year on the
contributions to the taxpayer's first-time home buyer savings account.
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from a first-time home
buyer savings account to the qualified beneficiary of that savings account.
(dd) For tax years
that begin on and after January 1, 2022, add, to the extent not included in
adjusted gross income, the amount of money withdrawn by the taxpayer in the tax
year from a first-time home buyer savings account, not to exceed the total amount
deducted under subdivision (cc) in the tax year and all previous tax years, if
the withdrawal was not a qualified withdrawal as provided in the Michigan
first-time home buyer savings program act, 2022 PA 6, MCL 565.1001 to 565.1013.
This subdivision does not apply to withdrawals that are less than the sum of
all contributions made to a first-time home buyer savings account in all
previous tax years for which no deduction was claimed under subdivision (cc),
less any contributions for which no deduction was claimed under subdivision
(cc) that were withdrawn in all previous tax years.
(2) Except as
otherwise provided in subsection (7), and section 30a, a personal exemption of
$3,700.00 multiplied by the number of personal and dependency exemptions shall
be subtracted in the calculation that determines taxable income. The number of
personal and dependency exemptions allowed shall be determined as follows:
(a) Each taxpayer
may claim 1 personal exemption. However, if a joint return is not made by the
taxpayer and the taxpayer's spouse, the taxpayer may claim a personal exemption
for the spouse if the spouse, for the calendar year in which the taxable year of
the taxpayer begins, does not have any gross income and is not the dependent of
another taxpayer.
(b) A taxpayer may
claim a dependency exemption for each individual who is a dependent of the
taxpayer for the tax year.
(c) For tax years beginning on and after January 1, 2019, a A taxpayer may claim an additional exemption under
this subsection in the tax year for which the taxpayer has a certificate of
stillbirth from the department of health and human services as provided under
section 2834 of the public health code, 1978 PA 368, MCL 333.2834.
(d) For tax
years beginning on and after January 1, 2026, a taxpayer who is at least 10
weeks pregnant as of the last day of the tax year and has been under the care
and observation of a physician since at least the tenth week of pregnancy may
claim an additional exemption under this subsection for that same tax year. In
order to claim the exemption under this subdivision, the taxpayer shall request
a medical statement from the taxpayer's physician verifying that the taxpayer
is at least 10 weeks pregnant as of the last day of the tax year and shall
attach the medical statement to the annual return filed under this part for the
same tax year for which the exemption is claimed. The medical statement
required under this subdivision must be signed and dated by the physician. As
used in this subdivision, "physician" means an individual licensed to
engage in the practice of medicine or the practice of osteopathic medicine and
surgery under article 15 of the public health code, 1978 PA 368, MCL 333.16101
to 333.18838.
(3) Except as
otherwise provided in subsection (7), a single additional exemption determined
as follows shall be subtracted in the calculation that determines taxable
income in each of the following circumstances:
(a) $1,800.00 for
each taxpayer and every dependent of the taxpayer who is a deaf person as
defined in section 2 of the deaf persons' interpreters act, 1982 PA 204, MCL
393.502; a paraplegic, a quadriplegic, or a hemiplegic; a person who is blind
as defined in section 504; or a person who is totally and permanently disabled
as defined in section 522. When a dependent of a taxpayer files an annual
return under this part, the taxpayer or dependent of the taxpayer, but not
both, may claim the additional exemption allowed under this subdivision.
(b) For tax years
beginning after 2007, $250.00 for each taxpayer and every dependent of the
taxpayer who is a qualified disabled veteran. When a dependent of a taxpayer
files an annual return under this part, the taxpayer or dependent of the
taxpayer, but not both, may claim the additional exemption allowed under this
subdivision. As used in this subdivision:
(i) "Qualified disabled veteran"
means a veteran with a service-connected disability.
(ii) "Service-connected disability"
means a disability incurred or aggravated in the line of duty in the active
military, naval, or air service as described in 38 USC 101(16).
(iii) "Veteran" means an individual
who served in the active military, naval, marine, coast guard, or air service
and who was discharged or released from the individual's service with an
honorable or general discharge.
(4) An individual
with respect to whom a deduction under subsection (2) is allowable to another
taxpayer during the tax year is not entitled to an exemption for purposes of
subsection (2), but may subtract $1,500.00 in the calculation that determines
taxable income for a tax year.
(5) A nonresident
or a part-year resident is allowed that proportion of an exemption or deduction
allowed under subsection (2), (3), or (4) that the taxpayer's portion of
adjusted gross income from Michigan sources bears to the taxpayer's total
adjusted gross income.
(6) In calculating
taxable income, a taxpayer shall not subtract from adjusted gross income the
amount of prizes won by the taxpayer under the
McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972 PA 239, MCL 432.1 to
432.47.
(7) For each tax
year beginning on and after January 1, 2013, the personal exemption allowed
under subsection (2) shall be adjusted by multiplying the exemption for the tax
year beginning in 2012 by a fraction, the numerator of which is the United
States Consumer Price Index for the state fiscal year ending in the tax year
prior to the tax year for which the adjustment is being made and the
denominator of which is the United States Consumer Price Index for the
2010-2011 state fiscal year. For the 2022 tax year and each tax year after
2022, the adjusted amount determined under this subsection shall be increased
by an additional $600.00. The resultant product shall be rounded to the nearest
$100.00 increment. For each tax year, the exemptions allowed under subsection
(3) shall be adjusted by multiplying the exemption amount under subsection (3)
for the tax year by a fraction, the numerator of which is the United States
Consumer Price Index for the state fiscal year ending the tax year prior to the
tax year for which the adjustment is being made and the denominator of which is
the United States Consumer Price Index for the 1998-1999 state fiscal year. The
resultant product shall be rounded to the nearest $100.00 increment.
(8) As used in this
section, "retirement or pension benefits" means distributions from
all of the following:
(a) Except as
provided in subdivision (d), qualified pension trusts and annuity plans that
qualify under section 401(a) of the internal revenue code, including all of the
following:
(i) Plans for self-employed persons,
commonly known as Keogh or HR10 plans.
(ii) Individual retirement accounts that
qualify under section 408 of the internal revenue code if the distributions are
not made until the participant has reached 59-1/2 years of age, except in the
case of death, disability, or distributions described by section 72(t)(2)(A)(iv) of the internal revenue code.
(iii) Employee annuities or tax-sheltered
annuities purchased under section 403(b) of the internal revenue code by
organizations exempt under section 501(c)(3) of the internal revenue code, or
by public school systems.
(iv) Distributions from a 401(k) plan
attributable to employee contributions mandated by the plan or attributable to
employer contributions.
(b) The following
retirement and pension plans not qualified under the internal revenue code:
(i) Plans of the United States, state
governments other than this state, and political subdivisions, agencies, or
instrumentalities of this state.
(ii) Plans maintained by a church or a
convention or association of churches.
(iii) All other unqualified pension plans that
prescribe eligibility for retirement and predetermine contributions and
benefits if the distributions are made from a pension trust.
(c) Retirement or
pension benefits received by a surviving spouse if those benefits qualified for
a deduction prior to the decedent's death. Benefits received by a surviving
child are not deductible.
(d) Retirement and
pension benefits do not include:
(i) Amounts received from a plan that allows
the employee to set the amount of compensation to be deferred and does not
prescribe retirement age or years of service. These plans include, but are not
limited to, all of the following:
(A) Deferred
compensation plans under section 457 of the internal revenue code.
(B) Distributions
from plans under section 401(k) of the internal revenue code other than plans
described in subdivision (a)(iv).
(C) Distributions
from plans under section 403(b) of the internal revenue code other than plans
described in subdivision (a)(iii).
(ii) Premature distributions paid on
separation, withdrawal, or discontinuance of a plan prior to the earliest date
the recipient could have retired under the provisions of the plan.
(iii) Payments received as an incentive to
retire early unless the distributions are from a pension trust.
(9) Except as
otherwise provided in subsection (10) or (11), in determining taxable income
under this section, the following limitations and restrictions apply:
(a) For a person
born before 1946, this subsection provides no additional restrictions or
limitations under subsection (1)(f).
(b) Except as
otherwise provided in subdivision (c), for a person born in 1946 through 1952,
the sum of the deductions under subsection (1)(f)(i), (ii), and (iv) is limited to $20,000.00 for a single
return and $40,000.00 for a joint return. After that person reaches the age of
67, the deductions under subsection (1)(f)(i), (ii), and (iv) do not apply and that person is eligible
for a deduction of $20,000.00 for a single return and $40,000.00 for a joint
return, which deduction is available against all types of income and is not
restricted to income from retirement or pension benefits. A person who takes
the deduction under subsection (1)(e) is not eligible for the unrestricted
deduction of $20,000.00 for a single return and $40,000.00 for a joint return under
this subdivision.
(c) Beginning
January 1, 2013 for a person born in 1946 through 1952 and beginning January 1,
2018 for a person born after 1945 who has retired as of January 1, 2013, if
that person receives retirement or pension benefits from employment with a
governmental agency that was not covered by the federal social security act, chapter 531, 49 Stat 620, 42 USC 301 to 1397mm, the sum of the deductions
under subsection (1)(f)(i), (ii), and (iv) is limited to $35,000.00 for a single return and, except as otherwise
provided under this subdivision, $55,000.00 for a joint return. If both spouses
filing a joint return receive retirement or pension benefits from employment
with a governmental agency that was not covered by the federal social security
act, chapter 531, 49 Stat 620, 42 USC 301 to 1397mm, the sum of the deductions under
subsection (1)(f)(i), (ii), and (iv) is limited to $70,000.00 for a joint return. After that person reaches
the age of 67, the deductions under subsection (1)(f)(i), (ii), and (iv) do not apply and that person is eligible
for a deduction of $35,000.00 for a single return and $55,000.00 for a joint
return, or $70,000.00 for a joint return if applicable, which deduction is
available against all types of income and is not restricted to income from
retirement or pension benefits. A person who takes the deduction under
subsection (1)(e) is not eligible for the unrestricted deduction of $35,000.00
for a single return and $55,000.00 for a joint return, or $70,000.00 for a
joint return if applicable, under this subdivision.
(d) Except as
otherwise provided under subdivision (c) for a person who was retired as of
January 1, 2013, for a person born after 1952 who has reached the age of 62
through 66 years of age and who receives retirement or pension benefits from
employment with a governmental agency that was not covered by the federal
social security act, chapter 531, 49 Stat 620, 42 USC 301 to 1397mm, the sum of the deductions under
subsection (1)(f)(i), (ii), and (iv) is limited to $15,000.00 for a single return and, except as otherwise
provided under this subdivision, $15,000.00 for a joint return. If both spouses
filing a joint return receive retirement or pension benefits from employment
with a governmental agency that was not covered by the federal social security
act, chapter 531, 49 Stat 620, 42 USC 301 to 1397mm, the sum of the deductions under
subsection (1)(f)(i), (ii), and (iv) is limited to $30,000.00 for a joint return.
(e) Except as
otherwise provided under subdivision (c) or (d), for a person born after 1952,
the deduction under subsection (1)(f)(i), (ii), or (iv) does not apply. When that person reaches the age of 67, that person is
eligible for a deduction of $20,000.00 for a single return and $40,000.00 for a
joint return, which deduction is available against all types of income and is
not restricted to income from retirement or pension benefits. If a person takes
the deduction of $20,000.00 for a single return and $40,000.00 for a joint
return, that person shall not take the deduction under subsection (1)(f)(iii) and shall not take the personal
exemption under subsection (2). That person may elect not to take the deduction
of $20,000.00 for a single return and $40,000.00 for a joint return and elect
to take the deduction under subsection (1)(f)(iii) and the personal exemption under
subsection (2) if that election would reduce that person's tax liability. A
person who takes the deduction under subsection (1)(e) is not eligible for the
unrestricted deduction of $20,000.00 for a single return and $40,000.00 for a
joint return under this subdivision.
(f) For a joint
return, the limitations and restrictions in this subsection shall be applied
based on the date of birth of the older spouse filing the joint return. If a
deduction under subsection (1)(f) was claimed on a joint return for a tax year
in which a spouse died and the surviving spouse has not remarried since the
death of that spouse, the surviving spouse is entitled to claim the deduction
under subsection (1)(f) in subsequent tax years subject to the same
restrictions and limitations, for a single return, that would have applied
based on the date of birth of the older of the 2 spouses. For tax years
beginning after December 31, 2019, a surviving spouse born after 1945 who has
reached the age of 67 and has not remarried since the death of that spouse may
elect to take the deduction that is available against all types of income
subject to the same limitations and restrictions as provided under this
subsection based on the surviving spouse's date of birth instead of taking the
deduction allowed under subsection (1)(f), for a single return, based on the
date of birth of the older spouse.
(10) In determining
taxable income under this section, a taxpayer may elect to deduct retirement or
pension benefits as provided under subsection (1)(f) with the following
limitations and restrictions or elect to apply the limitations and restrictions
in subsection (9), or subsection (11) if applicable:
(a) For the 2023
tax year, a taxpayer who was born after 1945 and before 1959 may deduct an
amount of retirement or pension benefits not to exceed 25% of the maximum
amount of retirement or pension benefits that the taxpayer would be allowed to
deduct for the tax year under subsection (1)(f)(iv) if the taxpayer's retirement or pension
benefits were subject to the limitations of that subsection only.
(b) For the 2024
tax year, a taxpayer who was born after 1945 and before 1963 may deduct an
amount of retirement or pension benefits not to exceed 50% of the maximum
amount of retirement or pension benefits that the taxpayer would be allowed to
deduct for the tax year under subsection (1)(f)(iv) if the taxpayer's retirement or pension
benefits were subject to the limitations of that subsection only.
(c) For the 2025
tax year, a taxpayer who was born after 1945 and before 1967 may deduct an
amount of retirement or pension benefits not to exceed 75% of the maximum
amount of retirement or pension benefits that the taxpayer would be allowed to
deduct for the tax year under subsection (1)(f)(iv) if the taxpayer's retirement or pension
benefits were subject to the limitations of that subsection only.
(d) For the 2026
tax year and each tax year after 2026, a taxpayer may deduct retirement or
pension benefits as provided under subsection (1)(f), except that the amounts
deductible under subsection (1)(f)(i) and (ii) combined are subject to the same maximum amounts allowed under
subsection (1)(f)(iv) for a single return and a joint return for that same tax year.
(e) For a joint
return, the limitations and restrictions in this subsection shall be applied
based on the date of birth of the older spouse filing the joint return. If a
deduction under subsection (1)(f) was claimed on a joint return for a tax year
in which a spouse died and the surviving spouse has not remarried since the
death of that spouse, the surviving spouse is entitled to claim the deduction
under subsection (1)(f) in subsequent tax years subject to the same
restrictions and limitations under this subsection, for a single return, that
would have applied based on the date of birth of the older of the 2 spouses.
(11) For tax years
beginning on and after January 1, 2023, in determining taxable income under
this section, a taxpayer with retirement or pension benefits received for
services as a public police or fire department employee subject to 1969 PA 312,
MCL 423.231 to 423.247, a state police trooper or state police sergeant subject
to 1980 PA 17, MCL 423.271 to 423.287, or a corrections officer employed by a
county sheriff in a county jail, work camp, or other facility maintained by a
county that houses adult prisoners may elect to deduct retirement or pension
benefits as provided under subsection (1)(f) without any additional limitations
or restrictions or elect to apply the limitations and restrictions in
subsection (9) or (10).
(12) As used in
this section:
(a) "Oil and
gas" means oil and gas subject to severance tax under 1929 PA 48, MCL
205.301 to 205.317.
(b) "Senior
citizen" means that term as defined in section 514.
(c) "United
States Consumer Price Index" means the United States Consumer Price Index
for all urban consumers as defined and reported by the United States Department
of Labor, Bureau of Labor Statistics.