1099-R

[wwagner19]

My husband retired in 2020.  He was a teacher in a public school in Michigan.  For the 1099R income what type of pension would this be?  Would it be classified as "G - from a government or public source" or as "N-some other pension (subject to Michigan tax)"?

[KathrynG3]

Teachers in Michigan public schools should use N - Some other pension.

Pension Schedule Form 4884 Instructions page 16, page 1 of the pdf, state that school districts would qualify as public benefits. However, all private and public pension and annuity benefits are fully taxable and may not be deducted from Michigan taxable income. 

In general, pension recipients who were

• born before 1946 will be exempt.
• born between 1946 and 1952 will have a portion exempt.
• born after 1952 will be fully taxable unless they were exempt from Social Security (police and fire fighters).

For more details, see Withholding for Pension Administrators.

[rayymond]

Is there an exemption in MI state returns for teachers 78 years old and on state teacher retirement.  Is there also any other exemptions for teachers and retirement benefits in MI

[JillS56]

There is no specific exemption for teachers in Michigan.   All retirement (private and public) and pension benefits are taxable to Michigan unless one of the following applies: 

Taxpayers born before 1946

May subtract all qualifying retirement and pension benefits received from public sources, and may subtract private retirement and pension benefits up to $54,404 if single or married filing separately or up to $108,808 if married filing jointly. Private subtraction limits must be reduced by public benefits subtracted. Withholding will only be necessary on taxable pension payments (private pension payments) that exceed the pension limits stated above for recipient born before 1946.

Taxpayers born between the years 1946 and 1952 

If the older of you or your spouse (if married filing jointly) was born during the period January 1, 1946 through December 31, 1952, and reached the age of 67, you are eligible for a deduction against all income and will no longer deduct retirement and pension benefits. Complete Schedule 1, line 23 instead of Michigan Pension Schedule, Form 4884.

The deduction is $20,000 for a return filed as single or married, filing separately, or $40,000 for a return filed as married, filing jointly. If you checked either SSA Exempt box 22C or 22G from Schedule 1, your deduction is increased by $15,000. If you checked both boxes 22C and 22G your deduction is increased by $30,000.

Taxpayers Born After 1952

All retirement (private and public) and pension benefits are taxable to Michigan, unless one of following applies:

• Taxpayers born January 1, 1953 through January 1, 1955 should not file Form 4884. Instead, taxpayers may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line.

To ensure you receive your maximum deduction complete Worksheet 2 in the MI-1040 booklet for Tier 3 Michigan Standard Deduction on Schedule 1, line 24.  

2021 Michigan Retirement Benefit Chart

Since you were born before 1946 you do not have to report any of your income on your Michigan return.   When preparing your return, the pension portion of your income will be subtracted from the AGI.