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Michigan Lawmaker’s Goal For 2015: Repeal Pension Tax

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The Michigan legislature’s 2015-16 term has kicked off, and one newly elected lawmaker is planning to dig up an old fight: the state’s pension tax.

Representative Tom Barrett is adamant about repealing the state’s tax on pension benefits. He told the Lasing State Journal that it will be the focus of one of the first bills he introduces:

State Rep. Tom Barrett, R-Potterville, who ousted one-term Democrat Theresa Abed in November, said one of the first bills he plans to introduce would repeal the state’s controversial pension tax.

Gov. Rick Snyder enacted the pension tax in 2011.

Under the law, if you are older than 62 and receive pension benefits, those benefits are taxed as normal income.

Older residents have less, or none, of their benefits taxed. The Lansing State Journal explains the “tiers” of the tax:

* Anyone born before 1946 has seen no big change.

* Anyone born from 1946-52 has some of their retirement income exempted from taxation. The ceiling is $20,000 for single filers and $40,000 for joint filers and includes money from public and private pensions, 401(k)s and IRAs. A provision excluding wealthier taxpayers from exemptions was struck down by the Michigan Supreme Court.

* Anyone born after 1952 has their retirement income taxed the same as other income.

When people in the second and third groups turn 67, they receive an exemption of $20,000 for a single filer and $40,000 for joint filers, regardless of whether the money comes from retirement income or a current job. Social security benefits and military pensions aren’t taxed.

Before 2011, Michigan was one of ten states that didn’t tax any public pension income.

Open Retirement will keep you updated on any legislative developments surrounding Michigan’s pension tax.

 

Photo by  John Morgan via Flickr CC License

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