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Scenario 2

Scenario 2

Liam

  • Born in 1947
  • Receives wages of $9,000
  • Charlotte, Liam's deceased spouse, was born in 1942 and died in 2018
  • Receives $12,000 in surviving spouse benefits from Charlotte’s private pension
  • Has not remarried
  • Filed jointly with Charlotte in 2018, claiming a subtraction for retirement and pension benefits

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

He answers the questionnaire in Form 4884 instructions as follows:

  • Question 1 – Yes
  • Question 2 – No
  • Question 3 – Single and the key person is Charlotte, whose birth year is earlier than Liam’s, because Liam claimed a subtraction for retirement and pension benefits on a return jointly filed with Charlotte in the year she died.
  • Question 4 – 1942, as Charlotte is the key person.
  • Question 5 – Yes and he is instructed to complete and compare Worksheet 2 and Section A of Form 4884.
Step 2 - Complete Worksheet 2
Liam completes Worksheet 2 and determines that his Tier 2 Michigan Standard Deduction would equal $20,000.
Step 3 - Complete and Review Section A

Liam then reviews Section A of Form 4884 to determine which provides him the greater benefit.

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

Liam does not make the election to claim the retirement and pension benefit subtraction allowed by Charlotte’s year of birth ($12,000) because his Tier 2 Michigan Standard Deduction allowed by his year of birth ($20,000) provides him a greater benefit. 

 
Step 5 - Carry to Schedule 1
Liam carries the amount calculated by Worksheet 2 to Schedule 1, line 25.

He does not file form 4884.
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