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FAQs for Public Act 4 of 2023 - Retirement State Tax Changes

FAQs for Public Act 4 of 2023 - Retirement State Tax Changes

  • For tax years beginning on and after Jan. 1, 2023, SPRS retirees are exempt from state income tax on their pension income beginning with the 2023 tax year, regardless of age.
  • You can always elect to have state income tax withheld from your pension.
  • No, the Michigan tax withholding will be reflected on your 2023 1099-R when those are available in January 2024.
  • We cannot answer that question; we can only speak to the changes PA 4 of 2023 enacts.
  • No. Although PA 4 did not officially take effect until Feb. 13, 2024, Michigan’s 2023 tax return, forms, and instructions (e-file and paper format) incorporate all retirement and pension benefit subtraction options – including those created in the new law. Retirees who filed their taxes prior to the law’s effective date need not file an amended return because the Michigan Department of Treasury will work impacted returns as they are received and prepare them for release after the law’s effective date. For more details about retirement tax changes, see the Michigan Department of Treasury website.
  • On Jan. 1, 2024, ORS automatically updated your tax withholding to “No Withholding.” Therefore, you would have seen a change in your state tax withholding starting with your January 2024 pension payment.
  • No. Your pension is taxed based on your gross taxable base benefit, so your federal tax withholding will not change. PA 4 of 2023 will only impact your liability for Michigan tax withholding.
  • Your tax liability will be determined by you or your spouse’s age, your filing status, and the retirement system(s) from which you receive a pension.
  • Your portion of your former spouse’s pension will be handled the same as a regular retiree. Your pension is not impacted by choices your former spouse makes about their tax withholding.
  • Yes.
  • Additional questions about tax obligations are best answered by a professional tax preparer or advisor. While we cannot provide tax advice, ORS is happy to help if you have a specific change you want to make to your tax withholding on a benefit received from our office.
  • There is no change to your pension benefit. The change is that your Michigan tax liability will change as the law is phased in.
  • ORS can only speak to the impacts of PA 4 of 2023 on your pension payments. For more information, consult with a tax advisor. For direct information and the exact language of PA 4 of 2023, you can review the full law here.
  • If you are a retired SPRS member, see the answer to question 1.
  • If you are a retired SPRS member, see the answer to question 1.
  • Additional questions about tax obligations or filing requirements are best answered by a professional tax preparer or advisor.
  • Distributions from the State of Michigan 401(k) Plan that are attributable to employer contributions and earnings on those contributions, including Personal Healthcare Fund contributions, would qualify for tax relief under PA 4 of 2023, to the extent dictated for the various age groups and tax years. Distributions from the State of Michigan 457 Plan are not exempt from state taxation.
  • Additional questions about tax obligations or filing requirements are best answered by a professional tax preparer or advisor. If you would like to adjust your state tax withholding on future distributions, you will need to submit a new MI W-4P form to Voya.