Since Jan. 1, 2012, most pension distributions are subject to Michigan tax. Some exclusion from income is available, depending on the year the recipient was born. Pensions that are never taxed by Michigan include U.S. military, Michigan National Guard, Social Security, railroad, and rollovers that were not federally taxed.
As of 2015, taxpayers born before 1946 can exclude up to $49,027 of private pensions for single or married filing separate, or $98,054 for married filing joint. For this age group, civil service and Michigan public-source pensions are entirely excluded but decrease the amount available for private pension exclusion. Michigan residents born before 1946 who receive public pensions from certain other states can also exclude this income. File Form 4884 to claim the exclusion.
Taxpayers born after 1946 but before 1953 are eligible for smaller exclusions of pension income. Retirees born after 1952 include the taxable amount of their IRA or 401k distribution in their Michigan tax calculation with no deduction or exclusion.