Massachusetts state retirement deduction

Forum|Forum|6 years ago
January 30, 2020
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I am using Turbo Tax Premier for the first time. In calculating my Massachusetts tax, turbo tax gave me a $1, 998 deduction for my Michigan Pension from where I retired. Since Michigan and Massachusetts both do not tax State Police Pensions, I am confused as to how Turbo tax came up with this deduction.

I made no contribution to this Michigan State Pension.

While I am on the subject of retirement plans, I am employed in Massachusetts as an Auxilliary town police officer, and as such am enrolled in the Mandatory OBRA deferred compensation SMART plan.

In 2019, I contributed $2,654.41 to this plan. Do I need to imput this info into TurboTax.

KathrynG3

Level 14

No, you do not need to enter the contribution to the OBRA deferred compensation plan, assuming the $2,654.41 is reported on your W-2.

Your personal information should include the details for residency by dates. The state you reside in with a Driver License issued would be considered your main residence.

To enter two part-year resident states in TurboTax, always begin with the state you did not live in December 31 and end by entering the state you do live in December 31 even if you maintain a residence in MI and MA.

Michigan taxes residents for all income earned and will credit back the amount of tax paid to the other state. Page 12 of the Nonresident/Part Year Massachusetts Instructions confirm that your state police pension is not taxable there.

2019 Form 4884 Pension Schedule Instructions bottom of page 15, identify retirement benefits deduction limits based on age.

2019 MI-1040 Individual Income Tax Instructions beginning at the bottom of page 13:

Line 13: Income Attributable to Another State. Nonresidents and part-year residents, complete Schedule NR. See instructions on page 50. Include federal schedules. 14 Michigan residents cannot subtract salaries and wages or other compensation earned outside Michigan. However, they may be entitled to a tax credit for income tax imposed by government units outside Michigan (see page 10). Residents may subtract, to the extent

Toward the bottom of page 17, the pension benefits that may and may not be subject to tax are identified.

TurboTax will identify the pension properly as long as you enter it EXACTLY as you received it. Entering both states is important, but since the pension was not taxable in Massachusetts, there is no tax to credit back to Michigan. If you were born after 1952, you could be subject to a Michigan state tax based on the instructions provided. Massachusetts provides a resource for other states' tax treatment of out-of-state government pensions.

If you feel the retirement income is not designated properly, go back to the State interview for Michigan, income section and revisit what code was entered according to your circumstances for Retirement and Pension Benefits. For Online, go to State>Edit>Income>Retirement>by your MA Pension, click Edit>Edit and verify the code that is entered for Michigan pensions