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Michigan - TurboTax Retirement Income Code For Inherited IRA

Hello, My wife and I are at the age that we can take Michigan deductions on retirement incomes.  For 2023, I have a pension distribution and a Traditional IRA to Roth conversion, and my wife has an inherited IRA distribution.  In the TurboTax state tax module for Michigan, on the input screen that says "Retirement Income and Pension Summary" (the info was transferred from the Federal module to the State module when I input the 1099Rs?), the pension has a code P (from private source or IRA), Roth conversion has a code C (Roth conversion), and the inherited IRA has a code N (some other pension subject to MI tax).  Since the inherited IRA is an "IRA", I changed the code from N to P.  However, TurboTax changed it back to code N and excluded the inherited IRA distribution from the deductions.  So for Michigan, is inherited IRA not qualified for retirement income deductions?  Or did I input it to TurboTax incorrectly?

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DavidD66
Employee Tax Expert

Michigan - TurboTax Retirement Income Code For Inherited IRA

An inherited IRA does not qualify for the Michigan retirement income exclusion.  According to Michigan Department of Treasury an IRA distributions after the death of the participant may only be subtracted from from income by a surviving spouse, and only if the decedent would have also qualified for a normal distribution under Distribution Code 7 at the time of death.   

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4 Replies
DaveF1006
Employee Tax Expert

Michigan - TurboTax Retirement Income Code For Inherited IRA

No. Unless your your wife is a surviving spouse, then the distribution is taxable. 

 

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Michigan - TurboTax Retirement Income Code For Inherited IRA

To clarify, TurboTax is correct in putting code "N" on the inherited IRA and it is taxable in Michigan?  My wife inherited the IRA from her parent.  In the past, neither of us was able to deduct the pensions and IRA distributions (to Roth and cash) on the Michigan return because we weren't old enough, and Michigan also has changed the tax law on retirement incomes for 2023.  The question on whether Michigan taxes inherited IRA didn't come up until now.

DavidD66
Employee Tax Expert

Michigan - TurboTax Retirement Income Code For Inherited IRA

An inherited IRA does not qualify for the Michigan retirement income exclusion.  According to Michigan Department of Treasury an IRA distributions after the death of the participant may only be subtracted from from income by a surviving spouse, and only if the decedent would have also qualified for a normal distribution under Distribution Code 7 at the time of death.   

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Michigan - TurboTax Retirement Income Code For Inherited IRA

Thank you

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