Court Rules Pensions Are Taxable

In a straight 4-3 party-line vote the Michigan Supreme Court has ruled that applying the state income tax on public pensions does not violate the Michigan Constitution. This new tax on pensions, which is currently 4.25%, will go into effect on January 1, 2012. The provision that uses your birthday to determine eligibility for the tax was also deemed constitutional. This means that if you are over 67 years old on January 1, 2012, you will be exempt from this new tax. The only provision that was deemed unconstitutional was the provision dealing with total household income in determining the tax threshold. In that same issue, the Court determined that provision violated the Michigan Constitution which prohibits a graduated Michigan income tax.

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