Is military retirement taxed in Michigan?

How it works in Michigan

Enter the taxable retired pay from your 1099-R on Schedule 1, line 11, which the 2025 form labels military retirement or pension benefits due to service in the U.S. Armed Forces or Michigan National Guard (taxable railroad retirement shares the line). Then list the same 1099-R on Schedule W, Table 2. The Schedule W instructions require military retirement benefits there even when no Michigan tax was withheld.

Keep it off Form 4884. The 2025 booklet says military and Michigan National Guard retirement is subtracted on Schedule 1, line 11, not on the pension schedule, which handles other public and private pensions under birth-year rules. Form 4884, line 10 (Section A), and the 2025 worksheets for Sections B through D each ask for the line 11 amount anyway, because it counts against the limit for those other pensions.

Here is how much it counts. MCL 206.30(1)(f)(iv) reduces the maximum deduction for other retirement benefits by the military deduction, and Section A of the 2025 Form 4884 and each of its worksheets start from $65,897 single or $131,794 joint minus line 11. For a single filer born in 1960 (Worksheet 3.3, Section D) with an assumed $40,000 military pension and $30,000 civilian pension: $65,897 minus $40,000 leaves $25,897, and 75% of that is $19,423. The other $10,577 of the civilian pension is taxed, about $450 at 4.25%.

For 2026, MCL 206.30(10)(d) ends the percentage phase-in, and Treasury's 2026 withholding guide says recipients born after 1945 may generally subtract retirement benefits up to $67,610 single or $135,220 joint. The statute still subtracts the military deduction from that limit, so a large military pension can leave little or no room for a second pension. Run Form 4884 each year rather than assuming the 2025 result carries forward.

On an assumed $36,000 military pension by itself, line 11 keeps $1,530 a year out of Michigan tax at the flat 4.25% rate for 2025. If an earlier return reported the pension as taxable or put it on Form 4884 instead of line 11, file an amended MI-1040 with Schedule AMD within four years of that return's original due date.

What trips Michigan retirees up

• The age-based Michigan Standard Deduction shrinks too, and the statute reads harsher than the form. MCL 206.30(9) says a person who takes the military deduction is not eligible for the $20,000 single or $40,000 joint deduction available against all income. Treasury's 2025 Worksheet 2 instead subtracts the line 11 military retirement, and any line 14 active-duty pay, from the $20,000 or $40,000 and allows whatever is left.
• NOAA Corps and Public Health Service retirees fall outside line 11. The statute names the Armed Forces and the Michigan National Guard, and 10 U.S.C. § 101(a)(4) defines the armed forces as the Army, Navy, Air Force, Marine Corps, Space Force and Coast Guard. Treasury's pages do not address NOAA or PHS retired pay (read October 9, 2026); a federal public retirement benefit is otherwise a Form 4884 item under MCL 206.30(1)(f)(i). Treasury also does not say how it treats retired pay earned in another state's National Guard; the statute names only the Michigan National Guard beside the Armed Forces.
• A civilian pension earned working for the military is not line 11 money either. Treasury's FAQ says a civilian pension from the military goes on Form 4884, if eligible, where it competes with the military deduction for room under the cap.
• A former spouse's court-ordered share does not fit line 11 as Treasury describes it. The FAQ limits the subtraction to the participant, or to the surviving spouse after death or disability, and says nothing about divorce, so retired pay divided in a divorce has no stated path onto line 11 in the former spouse's hands.