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Scenario 1

Scenario 1

Mary

  • Born in 1952
  • Receives public retirement and pension benefits of $46,000.
  • Bob, Mary’s deceased spouse, was born in 1944 and died in 2019.
  • Receives $7,000 in surviving spouse benefits from Bob’s private pension.
  • Has not remarried 
  • Filed jointly with Bob in 2019, claiming a subtraction for retirement and pension benefits.

    Mary must determine if she will claim the Michigan Standard Deduction allowed by her year of birth or the retirement and pension benefit subtraction allowed by her deceased spouse’s year of birth.
Step 1 - Complete "Which Section of Form 4884 Should I Complete"

She answers the questionnaire in Form 4884 instructions as follows:

  • Question 1 – Yes
  • Question 2 – No
  • Question 3 – Single and the key person is Bob, whose birth year is earlier than Mary’s, because Mary claimed a subtraction for retirement and pension benefits on a return jointly filed with Bob in the year he died.
  • Question 4 – 1944, as Bob is the key person.
  • Question 5 – Yes, and she is instructed to complete and compare Worksheet 2 and Section A of Form 4884.
Step 2 - Complete Worksheet 2
Mary completes Worksheet 2 and determines that her Tier 2 Michigan Standard Deduction would equal $20,000.
Step 3 - Complete and Review Section A

Mary then reviews Section A of Form 4884 to determine which provides her the greater benefit.

  • Line 9 – Enter $61,518 as she is filing single.
  • Line 10 –  Leave blank as it does not apply to her.
  • Line 11 – Enter $61,518 after subtracting line 10 from line 9.
  • Line 12 – Enter $46,000, her total public retirement and pension benefits.
  • Line 13 – Enter $15,518 after subtracting line 12 from line 11.
  • Line 14 – Enter $7,000, her total private retirement and pension benefits.
  • Line 15 – Enter $7,000, the smaller of lines 13 or 14.
  • Line 16 – Enter $53,000 after adding lines 12 and 15.
Step 4 - Choose the Better Subtraction

Mary makes the election to claim the retirement and pension benefits subtraction allowed by Bob’s year of birth ($53,000) instead of her Tier 2 Michigan Standard Deduction allowed by her year of birth ($20,000) because it provides the greater benefit.

Mary proceeds to complete Form 4884 along with Section A using the numbers detailed in Step 3.

 
Step 5 - Carry to Schedule 1
Mary carries the amount from Form 4884, line 16 to Schedule 1, line 27.