Issue 11 . What effect does 2025 PA 24 have on the taxation of Social Security income?

Despite the additions of subsections 30(10) and (11) under PA 4, taxpayers with little or no retirement or pension income may still benefit most from electing to claim a standard deduction under subsection 30(9). 2025 PA 24 amended subsection 30(9) to temporarily expand the Social Security income deduction for certain taxpayers eligible to claim the standard deduction. Specifically, for taxpayers born after 1952 who reach the age of 67, the following rules apply:

For tax years 2026 through 2028, these taxpayers who have Social Security income included in AGI may subtract both the Social Security income and a full standard deduction. However, their standard deduction must still be reduced by the personal exemption and any deductions claimed for taxable railroad retirement benefits, compensation (including retirement benefits) due to service in the U.S. Armed Forces, or retirement benefits due to service in the Michigan National Guard.

For tax years prior to 2026 and after 2028, their standard deduction must be reduced by the personal exemption and any deductions claimed for taxable Social Security, taxable railroad retirement benefits, compensation (including retirement benefits) due to service in the U.S. Armed Forces, or retirement benefits due to service in the Michigan National Guard.

As with the standard deduction prior to PA 24, a couple filing a joint return may use the year of birth and age of the living, older spouse to determine eligibility for the standard deduction.

Example I. Claude is a working, single taxpayer who is 71 years old in 2025 and was born in 1954. Claude did not serve in the U.S. Armed Forces or Michigan National Guard and had the following income for tax year 2025 :

$18,000 wages

$ 5,000 retirement and pension benefits

$12,000 Social Security income

$35,000 total income in AGI.

Claude can deduct his Social Security income under subsection 30(1)(f)(iii). If Claude were to take a deduction for retirement and pension benefits under subsection 30(10), he could be eligible to deduct up to $49,423; however, he only has $5,000 in qualifying benefits and therefore may benefit more from taking a $20,000 standard deduction under subsection (9)(e). If he takes the standard deduction in 2025, Claude is required to reduce the $20,000 by the amount he deducts for his personal exemption ($5,800 for 2025) and Social Security income. Claude would evaluate his options as follows: