Broker Check

Tax relief is back! A snapshot to Michigan’s 2024 Retirement Income Tax Repeal

June 03, 2024

If you are currently taking income from a taxable IRA account, pension or most any taxable retirement plan as a Michigan resident…tax relief may be coming your way! 

The May 2011 legislative decision to make these types of retirement income taxable in Michigan for residents under a certain age has been repealed and new laws went into effect for tax year 2024.  While I cannot give you tax advice, I can provide you with tax education, so you are armed with the information required to take advantage of these new tax laws.

 

Phase-In Period

The repeal of Michigan’s retirement income tax will be implemented gradually to ensure a smooth transition for retirees and the state’s revenue system. Here’s a breakdown of how the phase-in will work over the next few years:

 

2024 - Initial Reduction

Starting in the 2024 tax year, retirees will see a partial reduction in the state tax on retirement income.  A certain percentage of retirement income, such as pensions, 401(k) withdrawals, and IRA distributions, will become exempt from state taxes. 

 

2025 - Increased Exemption

In the 2025 tax year, the exemption percentage will increase, allowing a larger portion of retirement income to be tax-free.

 

2026 - Full Implementation

By the 2026 tax year, the retirement income tax repeal will be fully implemented with the potential for no State of Michigan income tax on retirement income.

 

Eligibility Criteria

Requirements

Retirees must meet a specific age requirement to qualify for the tax exemption and may be subject to a retirement income cap.

Types of Income

The repeal covers various forms of retirement income, including:

  • Public and private pensions
  • 401(k) and 403(b) plan withdrawals
  • Taxable IRA distributions including Traditional, SEP and SIMPLE IRAs
  • Social Security benefits

 

For a full breakdown of this Michigan income tax repeal, please consult with your tax advisor.  If you are your own tax advisor, and meet the above criteria, I highly recommend this be the year that you seek professional tax guidance!

 



Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™

Enders Wealth Management

37800 Van Dyke Ave, Suite 125

Sterling Heights MI 48312

www.enderswm.com

#kimenderscfp

 

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker-dealer and a Registered Investment Adviser.  Cetera is under separate ownership from any other named entity.  All investing involves risk, involving the possible loss of principal.  There is no assurance that any investment strategy will be successful.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

The views depicted in this material are for informational purposes only and are not necessarily those of Cetera Advisor Networks LLC. They should not be considered specific advice or recommendations for any individual.

This piece is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional retirement account to a Roth retirement account is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.