Is a 1099-R distribution from a 403b account excludable from MI state tax return? Does it qualify as "other qualified IRA distribution or private source pension?

[readytolearn]

Turbo Tax asks: "Where is this distribution from? Your answer will determine if your pension income is excludable on your MI state return."

[ColeenD3]

Please see the link for complete information.

MI 403(b)

To the extent that 403(b) distributions are included in federal adjusted gross income (AGI), they are included in Michigan taxable income unless an adjustment applies. Distributions from a 403(b) plan that are defined as retirement benefits under the Michigan Income Tax Act (Part 1) may be subtracted from Michigan income subject to certain age and dollar limitations. The retiree must have retired under the terms of the plan, and the distribution must be attributable to employer contributions or employee contributions mandated by the plan.

[readytolearn]

Thank you for the link to info that appears to address my question, however, I'm unable to infer whether a 1099-R distribution that was an RMD from a 403b account is excludable from my MI state tax as a subtraction from Federal income. I should have included that info in my original question.

[JulieS]

You can consider that your 403(b) distribution is an RMD and that all of your RMD was taken for the year. 

[readytolearn]

Is this RMD distribution from my 403b excludable from income on my Michigan State return?

[DavidD66]

Whether or not your distribution was for an RMD is not relevant.  Whether your distribution from your 403(b) plan depends on two factors, your age and the type of retirement plan.  According to Kiplingers:

Taxpayers Born Before 1946: Income from federal and Michigan government retirement plans is exempt. Government pensions from other states are also exempt if the other state does not tax Michigan government pensions. In addition, up to $51,570 of income from private retirement plans is exempt (up to $103,140 for joint filers). Taxpayers can also deduct up to $11,495 of interest, dividends, and capital gains (up to $22,991 for joint filers).

Taxpayers Born Between 1946 and 1952: Up to $20,000 of income from a retirement plan is exempt (up to $40,000 for joint filers). Once these taxpayers turn 67 years old, the retirement income exemption is replaced with a $20,000 standard deduction against all income ($40,000 for joint filers). The standard deduction is reduced by any deductions taken for military or railroad retirement benefits. Retirees with pension benefits from employment with a government entity that was exempt from the Social Security Act have higher exemption and deduction limits.

Taxpayers Born After 1952: Retirement income is generally not exempt (although pension income from employment with a government entity that was exempt from the Social Security Act may be deductible). However, once these taxpayers turn 67 years old, they can either (1) claim personal exemptions and deduct Social Security, military, and railroad retirement income, or (2) deduct $20,000 from all income sources ($40,000 for joint filers).

[riverlake12]

I worked for the State of Michigan for almost 37 years and was a regulatory agent when I retired. I put into my own retirement (457 acct). Do I qualify for the SSA exemption, and where do I find this information?

[JulieS]

No, 457 plans distributions are taxable on the Michigan tax return. Here is an excerpt from Michigan.gov about the retirement distribution subtraction:

"What Distributions Do Not Qualify for a Subtraction?

Certain distributions reported on form 1099-R are not retirement or pension benefits. Under Michigan law, deferred compensation is taxable. These distributions include:

• All distributions from 457 plans
• Distributions from 401(k) or 403(b) plans sourced to employee contributions and the earnings from those contributions if they were not matched by the employer.
• Early distributions under the terms of the retirement plan are always taxable regardless of the date of birth of the taxpayer. (See retirement code chart for 1099-R below.)"

Click here for more details.