Michigan’s new pension tax, passed by the Legislature and signed by the governor in 2011, goes on the books in January.
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Public and private pensioners born Jan. 1, 1946 and later will be affected by the tax change. Those born before 1946 will continue to receive the same tax breaks they have been getting.
Starting in January, pension administrators are required to withhold taxes from benefit checks. Monthly tax withholding will range from zero for those with pensions that amount to $1,650 a month or less and up to $101.49 for those with benefits $4,000 and over, according to estimates published by the Michigan Department of Treasury.
Older Michiganders also will be hit with other tax changes that can add hundreds of dollars to their yearly tax bill. These include elimination of the special state income tax exemption for seniors, a substantial reduction in the Earned Income Tax Credit, elimination of credits for charitable contributions, and reductions in Homestead Property Tax Credit for those whose annual household resources are above $21,000.
The three-tiered pension tax works like this:
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