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Scenario 2

Scenario 2

Betty and William

  • Filing Joint
  • William was born in 1948, received public retirement and pension benefits of $10,000, and wages from a part-time job
  • Betty was born in 1951 and received private retirement and pension benefits of $20,000
  • Johanna, William’s deceased spouse, was born in 1945 and died in 2015
  • William is received $7,500 in surviving spouse benefits from Johanna’s private pension.

They must determine if they will claim the Michigan Standard Deduction or a retirement and pension benefit subtraction.

Step 1 - Complete "Which Section of Form 4884 SHOULD I COMPLETE"

Betty and William refer to the Form 4884 instructions in the MI-1040 Booklet and answer the questionnaire as follows:

  • Question 1 - Yes
  • Question 2 - No
  • Question 3 – Married filing jointly and the key person is William. Johanna, William’s deceased spouse, may not be the key person as William has remarried since her death.
  • Question 4 – 1948, as William is the key person..
  • Question 5 - No
  • Question 6 - Yes, and they are instructed to complete and compare Worksheet 2 and Worksheet 3.3.
Step 2 - Complete Worksheet 2

After completing the questionnaire, William and Betty complete Worksheet 2 and determine that their Tier 2 Michigan Standard Deduction would equal $40,000.

Step 3 - complete worksheet 3.3

After William and Betty then complete Worksheet 3.3 and determine that they are eligible for a retirement and pension benefit subtraction of $30,759 under Section D of Form 4884.

 

Step 4 - Choose the Better Subtraction

William and Betty do not make the election to claim the retirement and pension benefit subtraction ($30,759) because their Tier 2 Michigan Standard Deduction ($40,000) provides them a greater benefit.

Step 5 - Carry to Schedule 1

William and Betty carry the amount calculated by Worksheet 2 to Schedule 1, line 25.

They do not file Form 4884.