By Peter G. Pupke, Esq., Checkpoint News
The Michigan Department of Treasury has issued a release explaining the recent changes made by L. 2025, H4961 (P.A. 24) that will impact the state retirement deduction and receive social security. (Notice Regarding Social Security Taxation Changes in Public Act 24 of 2025, Mich. Dept. Treas., 11/17/2025.)
Background
In Michigan, calculation of an individual’s income tax liability begins with the amount reported by the individual on their federal income tax return as adjusted gross income (AGI). For some taxpayers, AGI may include a portion of their social security (“SSA”) income. Michigan law allows taxpayers to deduct SSA income included in AGI that flows through to the Michigan return.
Michigan law also allows a deduction for qualified retirement and pension benefits, subject to certain limitations. For taxpayers who reach the age of 67, a “standard deduction” may be claimed in lieu of that retirement deduction. The standard deduction is applied to all types of income and is generally limited to $20,000 for single returns and $40,000 for joint returns. For anyone that claims the standard deduction, additional adjustments may apply depending on their year of birth. For anyone born after 1952, the taxpayer is required to offset the standard deduction by the personal exemption amount and, prior to PA 24, the amount of the SSA deduction for that year.
Change Made by PA 24
PA 24 reverses the requirement to offset the standard deduction by the deduction taken for SSA income for taxpayers born after 1952 who have reached the age of 67. This reversal applies for tax years 2026 through 2028. The result is that these taxpayers may receive the benefit of both the standard deduction and the social security deduction in tax years 2026 through 2028.
Taxpayers Impacted by Change
This change will only impact taxpayers born after 1952 who receive SSA income and claim the standard deduction on their Michigan income tax return. It does not impact taxpayers who do not claim the standard deduction on their return, such as taxpayers who elect to deduct their retirement and pension benefits.
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