Fire, Police, and Correction Officer Retirees

Lowering MI Costs Plan

In 2023, The Lowering MI Costs Plan amended MCL 206.30, which provides taxpayers with more options to choose the best taxing situation for their retirement benefits beginning tax year 2023.

Although subject to a temporary 4-year phase-in period beginning tax year 2023, this new law essentially restores the pre-2012 retirement and pension benefits subtraction for most taxpayers in Michigan beginning in 2026. This law change will ultimately benefit most retirees in Michigan while ensuring that previous benefits for taxpayers in unique circumstances remain unchanged.

The law change took effect on February 13, 2024. Treasury is committed to ensuring that all eligible retirees can take full advantage of the expanded subtraction options. Therefore, beginning with Michigan’s 2023 tax return, forms, and instructions (e-file and paper format), all retirement and pension benefit subtraction options will be incorporated - including those created in the new law.

Who Qualifies as a Safety Officer?

Police or Fire Department Employees

You qualify if you were employed in a Michigan police or fire department as:

a local police officer
a local firefighter
EMS personnel
an emergency telephone operator

Local police and fire can be employed through a city, county, village, township or institution of higher education.

You must be subject to the Michigan Compulsory Arbitration of Labor Disputes in Police and Fire Departments Act under 1969 PA 312 (see MCL 423.232(1)(d) and (2))

You do not qualify if you are considered:

support or administrative staff within a local department
a metropark police officer
EMS/emergency telephone operators employed outside of a department (e.g. dispatch center or 911 authority)

Michigan State Police Employees

You qualify if:

you held the rank of trooper or sergeant while working in Michigan at some point in your career

You must be subject to the Michigan Compulsory Arbitration of Labor Disputes of State Police Troopers and Sergeants Act under 1980 PA 17

County Correction Officers

You qualify if you received certification under the Local Corrections Officer Training Act and were employed by a county sheriff in a facility that houses adult prisoners, such as:

a county jail
a work camp

You do not qualify if you worked as:

an MDOC Corrections Officer
support or administrative staff within a county corrections facility
another county employee without a certification (e.g. probate officer, pretrial officer)

Recipients of a qualifying distribution included in AGI from service in federal employment that is substantially similar to Qualified Fire, Police, and County Corrections Service also qualify.

Step 1 - Do You Have a Qualified Distribution?

Use the 1099-R distribution chart to determine whether your distribution qualifies for a retirement and/or pension benefits subtraction.
Determine if you are following the specific rules of the retirement plan. For a retirement distribution to qualify for a retirement/pension subtraction the taxpayer must retire under the specific rules of the retirement plan. Learn more about qualified distribution requirements depending upon your plan.
Compare options 1 and 2 to determine which subtraction option is most advantageous for you.

If you do not qualify based on the distribution chart in step one, then you do not have a qualified subtraction and options one and two are not applicable.

Step 2 - Compare Subtraction Options

Option 1: Retirement and Pension Benefit Subtraction

A recipient of a qualified distribution under this provision may elect to deduct all qualified public retirement benefits to the extent included in adjusted gross income (AGI) with no limit. Private benefits may be deducted up to the private pension limits, but any public retirement deduction claimed reduces the maximum private retirement deduction allowed.

The 2023 private retirement limits are:

up to $61,518 if single or married filing separate, or
up to $123,036 if married filing a joint return.
These maximums are subject to reduction by the amounts claimed on Schedule 1 for military pay and the following retirement or pension benefits: U.S. Armed Forces, Michigan National Guard, and Railroad Retirement Act.

If public source pension benefits are greater than the maximum private retirement income amount, no additional retirement subtraction is allowed.

This group of retirees must file Form 4884, Pension Schedule.

Spouse of a Deceased Safety Officer Information

Option 2: Michigan Standard Deduction

You may elect to take the greater of the Michigan Standard Deduction (option 2) or the allowable retirement and pension benefit subtraction (option 1) as long as the older of you or your spouse, if filing jointly, was born after 1945 and has reached the age of 67.

To determine your eligible Michigan Standard Deduction refer to your age group.