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Scenario 5

Scenario 5

Lisa and Scott

  • Filing Joint
  • Scott was born on January 1, 1957 and received private retirement and pension benefits of $30,000.
  • Lisa was born in 1957 and is receiving an IRA distribution (private retirement and pension benefits) of $20,000.

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"

Lisa and Scott 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 identify Scott as the key person.
  • Question 4 – 1957, as Scott 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

Scott and Lisa complete Worksheet 2 and determine that their Tier 3 Michigan Standard Deduction would equal $29,200.

Step 3 - Complete worksheet 3.3

Scott and Lisa then complete Worksheet 3.3 and determine that they are entitled to a retirement and pension benefits subtraction of $30,759 under Section D of Form 4884.

Step 4 - Choose the better subtraction

Scott and Lisa elect to claim the retirement and pension benefit subtraction allowed under Section D ($30,759) instead of their Tier 3 Michigan Standard Deduction ($29,200) because it provides them the greater benefit. They carry the amount calculated by Worksheet 3.3 to Form 4884, line 19.

Step 5 - Carry to Schedule 1

Scott and Lisa carry the amount from Form 4884, line 19 to Schedule 1, line 27.