Michigan Std Deduction

[Snaggletooth]

Michigan people moved to TN in Sept 2015. Both are over 65.

In the calculation of taxable income, Drake is calculating a standard deduction of $40,000, with a note that both spouses are over 65, entitling them to a deduction of this amount.

I am aghast at a std deduction this high, PLUS it is not pro-rated for a partial year residency.

I am suspicious either Drake or myself have made a mistake.

Any Michigan folks know what's going on?

[kathyc2]

It's not really a standard deduction, but exclusion of some retirement income. MI used to exclude all retirement income, but now some may be taxable. Link explains it in more detail: http://www.michigan.gov/taxes/0,4676...2300--,00.html

[Matt Sova]

Michigan

There use to be a large (45k+ Single, 90k+ Joint) deduction for retirement income in Michigan from private plans (401k, IRA) and 100% exemption from public plans (government pensions). In fact, there still is for those born before 1946. SS, Railroad and Military pensions are non-taxable.

For those born between 1946 & 1952 before the age of 67 the pension subtraction is 20k/40k for ALL types of retirement income. Once they reach age 67 they get a 20k/40k subtraction against ALL their income, not limited to retirement income. This is the "Standard Deduction". SS, Railroad and Military pensions are non-taxable for both groups. Also, there is no 20k/40k if household resources > 75k/150k

Born after 1952 (like me)? Under age 67 - SS, Railroad and Military pensions are exempt. No other subtraction. After age 67 - you can either a) take a 20k/40k deduction against all income as long as your income is under 75k/150k, or b) exempt your SS, RR or Military pension and take the personal exemption on top of that. The personal exemption is phased out between 75-100/150-200.

[Snaggletooth]

Good Enough

Drake is taking a $40,000 exemption against ALL income, but they were in MI for only 8 months. Seems like it should at least be prorated for the time they were not a resident.

Thanks guys and ladies - good to hear from you Sova - greetings to Brighton, MI.

[Burke]

Are you using Schedule NR? It's for both NR and PY residents.

[Snaggletooth]

Not Prorated

Of course, NR is being used. But $40,000 deduction is not being prorated in Drake. Doesn't seem logical, but I can't find any evidence that it should be.