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Answer: The subtraction is not limited to the retirement income received for the services covered in subsection (11). The retirement income subtraction available under subsection (11) is available to any taxpayer with retirement or pension benefits received for services performed by the described public safety personnel. And it allows those taxpayers to “elect to deduct retirement or pension benefits as provided under subsection (1)(f) without any additional limitations or restrictions . . .” Subsection (1)(f) broadly references the types of benefits that may be deducted. As to retirement or pension benefits, this includes (1) those received from a federal or state public retirement system or from a political subdivision of this state, (2) those received from a public retirement system of another state if that state’s income tax laws similarly treat retirement or pension benefits from Michigan or its political subdivisions, up to the private retirement or pension benefit maximum, or (3) those received from any other retirement or pension system, or from a retirement annuity policy payable to a senior citizen for life, up to the private retirement or pension benefit maximum. Therefore, if a taxpayer receives a retirement or pension benefit for services performed by public safety personnel eligible under subsection (11), that taxpayer may also deduct any of the other categories of retirement or pension benefits under subsection (1)(f) with the only limitation being the private retirement or pension maximum as determined under (1)(f)(iv). As is the case for some other taxpayers with both public and private benefits deductible under subsection (1)(f), the limitation available for private benefits is reduced by any public benefits deducted.
Example E . In tax year 2024, taxpayer Jose, a retired state police trooper, had a Michigan public pension of $57,700. His spouse, Chris, age 65, had private retirement income of $30,400 and $43,000 in income from a retirement annuity policy. Jose and Chris will file a joint return for 2024. Both Jose’s and Chris’ retirement income is potentially deductible in tax year 2024 because they are taxpayers “with retirement or pension benefits received for services as a state police trooper.” The couple will deduct all $57,700 of Jose’s public benefits without limitation. Chris’ private retirement income is limited by the private retirement maximum for a joint return as determined under subsection (1)(f)(iv). Subsection (1)(f)(iv) requires that the private retirement maximum be reduced by the public pension benefits deducted by the couple. The private retirement maximum is computed as $128,080 reduced by the $57,700 of deductible public pension, or $70,380. Chris’ total private retirement benefits of $73,400 exceed the adjusted private retirement maximum. The couple may, therefore, deduct up to $70,380 of Chris’ private benefits, with the remaining amount, $3,020, reported as taxable on their joint return.
Example F. Taxpayer Kevin works as a local police officer and qualifies for an unlimited public retirement deduction under subsection (11). As part of a divorce between Kevin and his wife, Robin, an Eligible Domestic Relations Order (EDRO) is used to assign to Robin a portion of the retirement benefits that Kevin will receive upon retirement. See MCL 38.1701 et seq . The EDRO directs the retirement plan administrator to pay out a certain percentage of the retirement benefits upon Kevin’s retirement. In tax year 2026, Kevin retires and begins to receive retirement distributions. Based on the EDRO, a portion of the distributions are paid directly to Robin. Both Kevin and Robin are receiving retirement benefits that were earned from service as a qualifying local police officer; therefore, both will qualify for the unlimited public retirement deduction provided under subsection (11).