House passes pension tax bill

The Michigan House this week approved State Rep. Aaron Miller’s bill protecting surviving spouses from penalties related to the state’s pension tax.

Miller said the goal is to make sure a surviving spouse is not burdened with higher taxes when their older partner passes away. He said it’s the right thing to do so seniors aren’t saddled with higher and unexpected taxes after the death of their loved one.

The clarification is needed because Michigan’s tax on retirement income has three tiers based on the year a taxpayer is born. The income tax benefits often are best for those born before 1946. Pension taxes start to phase in for those born from 1946 through 1952, and the taxes are fully phased in for those born after 1952.

Because of these varying taxation levels, couples with spouses in different age tiers often choose to file joint tax returns using the age of the older spouse. Miller’s bill will allow a surviving younger spouse to continue filing with the deceased older spouse’s age as long as the surviving spouse does not remarry.

House Bill 5034 advances to the Senate for further consideration.