Michigan Pension credit

[Bobalik-tax]

Why is Turbo Tax not showing a $40,000 pension credit on line 25 of Schedule 1 Additions and Subtractions of my Michigan tax return?

Thank you

[DawnC]

When you went through the Michigan state return, did you make sure you entered the correct code on the Retirement and Pension Summary screen?    Do you have $40K of pension income showing up on Form 1040 on Line 5b?   

Go back to the federal section and review your 1099-R entry and make sure you answered all of the follow-up questions.   Search for 1099-R and use the jump to link to get back to your retirement income summary.  

Retirement and pension benefits include most income that is reported on Form 1099-R for federal tax purposes.  This includes defined benefit pensions, IRA distributions, and most payments from defined contribution plans. 

Generally, deferred compensation income is not included in the definition of retirement and pension benefits and therefore, does not qualify for special tax treatment.   

Michigan Retirement Income Subtractions 2024 -  Retirement Subtraction Options for 2024.

[Bobalik-tax]

Your response didn't help.

There was no place to enter the $40,000 pension credit.

[AmyC]

You don't enter it directly. The program calculates it based on your answers. I am going to assume you know that you qualify -from Retirement and Pension Benefits.

1. Double check your entries, birth date could have a typo.
2. Entering the 1099-R in the federal, answer all the questions.
3. Verify taxable income over $40,000 is showing.
4. In the state, edit and select the type of pension.

Once the program has all the correct information, it will enter the deduction for you.

[Gus]

Hello, I am having a related problem.   I am working on my father's taxes.  He has several 1099-R's.  Some have the code 7 and some have the code U.  Turbotax also asks me to enter the pension type.  I know it must be either P (Private) or N (other distributions subject to Michigan tax).  But I am not sure which.  I called the plan administrators and they do not know either.  Does anyone know the answer?  Or how I can find the answer?

Thank you.

GV

[AmyC]

Code U is for dividends distributed under an employee stock option plan. The pensions with code 7 would qualify for the credit. Then it is a question of when he was born and which rules apply.

@Gus 

[Gus]

Thanks, AmyC.

So TurboTax asks me to define the pension type:  I know it is not M (Military), R (Railroad), G (Government of Public) or C (Roth IRA conversion).  That leaves P (Private, including IRA's) or N (Other distributions subject to Michigan Tax).  So, is a 1099_R with Code 7 a "P" and anything with Code U an "N"?   

Thanks,
Gus

[IsabellaG]

Yes, the 1099-R's with code 7 would wind up as Type P on your Michigan return. However, if you enter your 1099-R with code U correctly in the Federal section of TurboTax, as you proceed through the federal interview, you'll say that the distribution is from None of the above and that you did something else with it. (cashed out). 

When you proceed to the MI return, that distribution will not be included in the Retirement Income and Pension Summary.  Only the pension distributions with Code 7 will be listed, with Type P.