When you first enter your 1099-R information on the Federal return you indicate that this is a "Qualified government or public pension".
Here's how to do that in TurboTax Deluxe:
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Select >> Federal Taxes (at the top of the screen)
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Select >> Wages & Income >> Scroll down to >> Retirement Plans and Social Security
- IRA, 401(k), Pension Plan Withdrawals (1099-R) >> Select >> Update
- Your 1099-R Entries >> Select >> The 1099-R that should be exempt from MI Tax >> Select >> Edit
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Select >> Continue through the screens until you come to >> Where is This Distribution From
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Select >> Qualified government or public pension
This will indicate that this is not taxable in MI