You are noticing this because Michigan is currently in the middle of a multi-year phase-out of the "Retirement Tax." Under the "Lowering MI Costs Plan" (Public Act 4 of 2023), Michigan is rolling bac...
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You are noticing this because Michigan is currently in the middle of a multi-year phase-out of the "Retirement Tax." Under the "Lowering MI Costs Plan" (Public Act 4 of 2023), Michigan is rolling back the 2011 rules that taxed private pensions and 401(k) withdrawals for younger retirees. Because it is now the 2025 tax year, you are seeing a much larger deduction than in previous years.
Gov. Whitmer Signs Lowering MI Costs Plan into Law, Cutting Taxes by $1 Billion for Working Families and Seniors
The new law expanded eligibility to almost everyone born before 1967 for the 2025 tax year. For 2025, you can deduct 75% of the maximum allowed retirement subtraction.
For a joint return, this deduction can be as high as $92,277. If you and your wife file jointly, Michigan allows you to use the birth year of the older spouse to determine your eligibility and your deduction limits. If either of you was born before 1967, your combined retirement income (including private pensions, IRAs, and 401(k)s) qualifies for this significant subtraction.