Tax reforms signed last year by Gov. Gretchen Whitmer are set to put billions of dollars back into Michiganders’ pockets.
MICHIGAN—Legislation set to take effect in Michigan this year is set to help hundreds of thousands of families pay bills, put food on the table, and better afford the essentials—namely by slashing state taxes and putting more money back into Michiganders’ pockets.
It’s called the “Lowering MI Costs” plan. And after it was passed by Democratic lawmakers and signed into law last year by Gov. Gretchen Whitmer, many Michiganders (particularly retirees and lower income earners) are set to realize a significant tax savings beginning in 2024.
Here’s what you need to know:
Retirement Tax Rollback
House Bill 4001 (which was sponsored by state Rep. Angela Witwer) amended Michigan’s Income Tax Act to phase out the state-level retirement tax over the next four years—a move which is set to save an average of $1,000 for about 500,000 households across Michigan.
By 2026, just about all forms of retirement income in Michigan—including private-sector pensions, withdrawals from individual retirement accounts, and the portion of a 401k account that is subject to an employer match—will be fully exempt from the state income taxes.
But some retirees won’t have to wait that long to start seeing some immediate savings.
Beginning with tax returns that are due on April 15 (for income earned in 2023), Michigan retirees—depending on their date of birth—have new options for how to file their state taxes. Those born between Jan. 1, 1946 and Dec. 31, 1958 can claim a 25% deduction this year.
A special provision in the legislation also allows certain retired firefighters, police officers, and corrections workers to fully deduct the state retirement tax beginning this year. Other retirees are set to see their state pension tax shrink annually before it disappears altogether in 2026.
Click here for detailed information about the recent changes to the retirement tax in Michigan, including a precise schedule of when (and how) it will be phased out over the next few years.
Working Families Tax Credit
Legislation that Whitmer signed into law last year will also quintuple Michigan’s Working Families Tax Credit from 6% to 30% of the federal level, beginning with the 2023 tax year—which will translate to an average tax refund of $3,150 for 700,000 Michigan families.
The most immediate savings, however, is set to arrive within the next month.
Because the legislation applies retroactively to income earned in 2022, eligible Michiganders will automatically receive tax rebate checks (of about $550) starting on Tuesday, Feb. 13, 2024.
Democrats in the state Legislature had intended to provide Michiganders with those tax credits last year, but Republican lawmakers declined to let it go into effect immediately—a move which ultimately delayed the rebate checks for a full year, according to Michigan Advance.
Qualifying Michiganders reportedly include US citizens who have an “earned income under $63,398” and an investment income below $11,000. The boosted Earned Income Tax Credit also provides a tax credit of up to $2,229 for tax year 2023, but that amount will depend on a range of factors—including income, filing status, number of children, and disability status.
“This directly benefits half the children in Michigan, and moms and dads can use this extra money at tax time to pay the bills, put food on the table, and buy school supplies,” Whitmer said last month. “Across the United States, inflation is decreasing and take-home pay is increasing, proving that our work in Michigan and President Biden’s efforts in Washington are moving us in the right direction. Let’s keep rolling up our sleeves, lowering costs, and growing our economy.”
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