Scenario 2
Joint filers born during the period January 1, 1946, through December 31, 1952, with the older spouse born in 1948 and receiving surviving spouse benefits from a deceased spouse.
William and Betty are filing a joint return. William, born in 1948, is receiving public retirement and pension benefits of $10,000 and wages from a part-time job. Betty, born in 1951, is receiving private retirement and pension benefits of $20,000. William’s deceased spouse, Johanna, was born in 1945 and died in 2015. William is receiving $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:
William and Betty refer to the Form 4884 instructions in the MI-1040 Booklet and completes “Which Section of Form 4884 Should I Complete?”
They 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:
William and Betty complete Worksheet 2 and determine that their Tier 2 Michigan Standard Deduction would equal $40,000.
Step 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:
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:
William and Betty carry the amount calculated by Worksheet 2 to Schedule 1, line 25.
They do not file Form 4884.