Thank you for joining us, MD0311!
You stated you have questions about completimg the form, W-4P, when filing for your MI, Office of Retirement Services, pension.
- Being that Michigan's handling of retirement income began a four-year phase-out of its retirement income tax, the process of determining how much you should withhold for taxes has gotten a little more complicated.. The good news is that by the 2026 tax year, pensions and income from 401(k) and IRA withdrawals will be fully exempt from state income tax,
Generally your plan adminisrator over your pension will use several default withholding rules which will allow the administrator to withhold the correct amount; however, this will no work out for some taxpayers depending on their personal tax situation.
Benefits will be automatically calculated based on the following general rules:
• Recipients of qualifying public safety retirement benefits are not taxed on any qualifying public retirement benefits, and may subtract qualifying private pension and retirement benefits up to $64,040 if single or married filing separately, or $128,080 if married filing a joint return. Private pension limits are reduced by the subtraction claimed for public pension sources. See the MI-1040 Instruction Booklet and RAB 2023-22 for more information.
• Recipients born before 1946 may subtract all qualifying pension and retirement benefits received from public sources, and may subtract qualifying private pension and retirement benefits up to $64,040 if single or married filing separately, or $128,080 if married filing a joint return. Private pension limits are reduced by the subtraction claimed for public pension sources.
• For 2024, recipients born in 1946 through 1962 may generally subtract qualifying retirement and pension benefits up to $32,020 if single or married filing separately, or $64,040 if married filing jointly. If greater, a taxpayer may be eligible for the standard deduction of $20,000 for single or married filing separately or $40,000 for married filing jointly, against all income. Regardless which option is most beneficial on the retiree’s annual return, a pension administrator may assume that up to $32,020 or $64,040 of payments are not taxable.
• For 2024, payments to recipients born after 1962 will generally be fully subject to tax and withholding after deducting personal exemptions.
If you prefer to opt out of the default rules or you estimate thy are not withholding enough tax for your particular situation, then you should complete the W-4P and calculate your own taxable benefits and withholdings.
- Start by filling out the general information section. When selecting your filing status, only check the “Married, joint return” box if your spouse does not also receive qualifying retirement or pension benefits.
- Next consider whether you should check the box on line1. Checking box one will tell the administrator to not withhold any taxes for the state, based on the general rules listed above. If you would like to determine your own withholdings, you will need to check the box on line 1 and then skip line 2 and use line 3, or line 4, to determine the percent or the amount of tax you want withheld.
- On line 3 you can enter the actual percentage amount you want withheld or if permitted, you can choose to skip line 3 and put an actual flat dollar amount you would like withheld from each payment.
- Lastly you must sign and date this W-4P and give it to the administrator of your retirement benefits as soon as possible.
Please click on the following links for more information:
Please feel free to reach backout with any additional questions or concerns you might have!
Have a great rest of your day!
Terri Lynn, EA
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer.”
