The Roth IRA in Michigan

Tax year 2026 is the first year Michigan’s 2011 “pension tax” is fully unwound. A converter who has already reached age 59½ can shelter a Roth conversion inside the restored retirement subtraction — up to $67,610 single / $135,220 joint — at zero state cost. Under 59½, the identical conversion is fully taxable at the flat 4.25% with no subtraction, and in two dozen cities a local layer can land on top.

This is the tenth state guide in the series, and Michigan is the first of the ten covered so far whose conversion cost turns on a birthday rather than a bracket. On a $100,000 conversion in 2026: a married-joint converter age 59½ or older with no other retirement income owes $0 — the whole conversion fits inside the $135,220 subtraction cap. The same converter at 58 owes $4,250, because under 59½ there is no subtraction at all. A single filer past 59½ converting $100,000 shelters the first $67,610 and owes about $1,377 on the rest. The date of the conversion decides which line you are on. (The city layer, which tracks the same age gate, gets its own section further down this page.)

The mechanics underneath are conventional. Michigan taxable income starts from federal AGI (MCL 206.30(1)), so a conversion enters the Michigan base the year it happens — no spread, no recapture, no clawback — and a qualified Roth withdrawal, which never enters federal AGI, never reaches the MI-1040 at all. What is not conventional is what happens next: for a 59½+ converter, Michigan then subtracts the conversion back out, up to the caps. How the state got here matters, because most of the guidance a reader will find online describes some earlier year of the story.

Michigan Roth report card

The same fourteen dimensions score every state in this series. Each verdict traces to the dataset at the end of this page; the workbook carries the identical card with its authorities.

Fifteen years to unwind the 2011 pension tax

Before 2012, Michigan broadly exempted retirement income. The 2011 restructuring (2011 PA 38) ended that, keying everything to birth year: three tiers, with taxpayers born before 1946 keeping the old treatment, the 1946–1952 cohort keeping a slice, and everyone younger getting essentially nothing until age 67. That regime is the “pension tax” of Michigan political shorthand, and it is why so much stale guidance keys eligibility to birth year.

2023 PA 4, the “Lowering MI Costs” act, unwound it on a four-year staircase. Each phase-in year re-opened the subtraction to a wider birth-year window at a growing share of the inflation-indexed private retirement maximum — 25% for 2023, 50% for 2024, 75% for 2025, 100% for 2026 — and each year taxpayers could elect the better of the phase-in, the legacy birth-year tiers, or the public-safety deduction (“retirees can opt into any one of the following calculation methods for which they qualify for each year,” per Treasury), with the forms applying whichever yields the lowest taxable income automatically.

The 2023 PA 4 phase-in staircase (MCL 206.30(10); RAB 2026-1). In every year, IRA distributions — conversions included — enter the subtraction only if taken at or after age 59½; under 59½ they are fully taxable. Historical rows are correct only for their own year.

For 2026 the controlling guidance is RAB 2026-1, approved January 8, 2026: the deduction now applies “regardless of year of birth” up to the indexed maximum — $67,610 for single and married-filing-separately filers, $135,220 joint, still gated for IRA money on age 59½ at the distribution date — per the 2026 Michigan Income Tax Withholding Guide (Form 446, Rev. 02-26) and the current MI W-4P instructions. (The TY2026 MI-1040 and Form 4884 booklet publishes in early 2027; the withholding-side documents are where the 2026 numbers live today. RAB 2026-1, written before the 2026 indexation, runs its examples on the TY2025 caps of $65,897 / $131,794.) Three fine-print rules shape the cap. It is per return, not per spouse — joint filers get exactly twice the single cap against combined benefits, whichever spouse received them. It is shared with every other retirement or pension benefit on the return — a couple already subtracting a $50,000 pension has $85,220 of joint headroom left for a conversion. And it is reduced by any military, Michigan National Guard, railroad, or public-safety amounts subtracted. One cohort keeps something better: filers born before 1946 still subtract public-source retirement benefits without limit — the one respect in which 2026 is not a full return to pre-2012 law; everyone born after 1945 has public benefits inside the same capped pool as private ones.

Authority: MCL 206.30(1)(f)(iv), (8), (9)(a), (10); 2023 PA 4; RAB 2026-1 (approved 1/8/2026); 2026 Form 446 Withholding Guide (Rev. 02-26); Form MI W-4P instructions

Convert the day after you reach 59½ and it qualifies; the day before, and it does not

The gate sits in the statute’s definition of what counts as a retirement benefit at all. MCL 206.30(8)(a)(ii) admits “individual retirement accounts that qualify under section 408 of the internal revenue code if the distributions are not made until the participant has reached 59-1/2 years of age, except in the case of death, disability, or distributions described by section 72(t)(2)(A)(iv)” — that last item is substantially-equal periodic payments, and those three are the only exceptions. The test is measured at the date of the distribution, not the tax year: in the year you reach 59½, a conversion executed the day after your half-birthday qualifies for the subtraction, and one executed the day before is fully taxable at 4.25% with no subtraction.

Michigan is unusually explicit that this applies to conversions by name, three separate times. Treasury’s Roth IRA FAQ: “Yes, conversions from a regular IRA to a Roth IRA that are included in adjusted gross income are subject to Michigan individual income tax. However, the rollover distribution from a regular IRA qualifies for the pension subtraction, within the limitations of the statute, if the individual is at least 59 1/2 years of age when the rollover occurs.” The 1099-R distribution-code chart in Treasury’s Tax Text names the transaction in its code-7 row — “Roth conversion if the participant is at least age 59½” qualifies — while codes 1 and 2, the codes an under-59½ conversion receives, do not (SEPP-type payments excepted). And RAB 2017-21 supplies the mechanism and a worked case: “the rollover transaction is treated as a distribution from the original retirement account,” and its Example 3 walks a taxpayer converting an entire traditional IRA to a Roth at age 60 — subtractable up to the annual cap. The RAB also frames the Box 7 code as “evidence of the basis of a distribution,” not the test itself — the statute’s age-at-distribution rule controls — but Form 4884 asks for the code on line 8D, so a converter whose 1099-R says code 2 should expect Treasury correspondence; no published guidance addresses the miscoded case.

One caution about checking this against Treasury’s own website: the department’s pension-recipients withholding FAQ still answers the conversion-subtraction question with “You may qualify for a subtraction if you were born prior to 1963” — that is the tax year 2024 phase-in answer, the 50% year, and it is superseded for 2026 by the birth-year-blind rule of RAB 2026-1. Fifteen years of near-continuous change have left Treasury’s own pages out of sync; where they disagree, the RAB and the statute under it win.

Authority: MCL 206.30(8)(a)(ii); Michigan Treasury Roth IRA FAQ (conversions answered by name); 2025 Tax Text 1099-R distribution-code chart; RAB 2017-21 §A(2)(a), §A(3) and Example 3; RAB 2026-1

A flat 4.25% — and the one year it was 4.05%

Michigan’s rate side is short. One flat rate, no brackets, no high-income recapture — so conversion planning at the state layer has no bracket management to do; the entire lever is the subtraction cap and the age gate above. The rate for tax year 2026 is 4.25% (MCL 206.51(1)(b)), confirmed by the annual determination issued April 15, 2026: per the FY2025 financial report, general-fund/general-purpose revenue decreased 1.56% while inflation rose 2.70%, so the statutory reduction formula did not fire and the rate stands.

Rate verified as of 2026-08-09

The 4.05% figure a reader may remember was real — for one tax year only, 2023. A 2015 law (2015 PA 180) wrote a revenue trigger into MCL 206.51(1)(c): when general-fund growth for the prior fiscal year outruns inflation, the rate drops by formula. FY2022 revenue fired it, and the 2023 rate fell to 4.05%. Whether the cut was permanent went through the full machinery: the Attorney General read it as one-year-only, Treasury administered it that way, the Court of Claims agreed in December 2023, and a unanimous published Court of Appeals opinion (Associated Builders & Contractors of Michigan v. Eubanks, March 7, 2024) affirmed — Treasury’s statement that day: “We will administer the law as the Courts have ruled.” The Michigan Supreme Court declined to take the appeal in August 2024. So 4.05% is history, correct for 2023 returns and no other.

The trigger itself, though, is permanent — the statute tests “each tax year beginning on and after January 1, 2023.” Every year the State Treasurer and the directors of the House and Senate Fiscal Agencies re-run the formula against the prior fiscal year’s accounts; it did not fire for 2024, 2025 or 2026. The 2027 rate is therefore not knowable today: it depends on the determination due by the January 2027 revenue conference (the 2026 letter actually arrived April 15), with 4.25% as the default — and after Eubanks, any future cut would likewise last one year. For multi-year conversion plans, treat Michigan as a flat 4.25% state with a small annual chance of a one-year discount.

Outside the retirement subtraction, the offsets are thin. Michigan has no general standard deduction — only a personal exemption, $5,900 per exemption for 2026 (Form 446). The one thing called a “Michigan Standard Deduction” is an election: a taxpayer who has reached age 67 may take $20,000 single / $40,000 joint (per return, keyed to the older spouse) against all income — wages, interest, conversion income alike — in lieu of the retirement subtraction (MCL 206.30(9)). In a large-conversion year the math is rarely close: a 67-year-old is necessarily past 59½, and the retirement subtraction shelters up to $67,610 / $135,220 of the conversion where the election stops at $20,000 / $40,000. The election still wins for 67+ filers with big wage or interest income and little retirement income — and, for 2026 through 2028 only, 2025 PA 24 sweetens it by letting filers born after 1952 stack it with the Social Security deduction. Michigan’s forms apply whichever route yields the lower taxable income.

Authority: MCL 206.51(1)(b)–(c); Treasury taxpayer notice and joint determination letter, 4/15/2026; Associated Builders & Contractors of Michigan v. Eubanks (Mich. Ct. App., published, 3/7/2024); Treasury statement 3/7/2024; MCL 206.30(2), (7), (9); 2025 PA 24; RAB 2026-1 Issue 11; 2026 Form 446

The custodian withholds 4.25% unless you say otherwise — and on a conversion, that slice never reaches the Roth

Michigan withholding on IRA money is opt-out, not opt-in, and it has been since the same 2011 act that created the pension tax. Under MCL 206.703, a pension or retirement-benefit payor subject to Michigan’s jurisdiction — IRA custodians included — must withhold on any payment expected to be taxable unless the recipient opts out on Form MI W-4P; the 2026 withholding guide states the default flatly: absent an MI W-4P, administrators withhold on all taxable pension distributions at 4.25 percent. The full restoration defuses much of this in practice — the MI W-4P’s default rules let an administrator assume that up to $67,610 or $135,220 of payments are not taxable, so a 59½+ conversion within the caps should default to zero withholding — but the trap survives exactly where the tax does: conversions under 59½, and amounts above the caps.

Custodian paperwork confirms the default is real. Merrill’s state-withholding matrix (rev. 7/26) lists Michigan as “Mandatory Opt Out” at 4.25%, with the state form required to decline; Fidelity’s (01/26) puts Michigan with Arkansas in its strictest bucket — state tax applies regardless of the federal election — and points to the MI W-4P. Neither matrix mentions conversions by name; the lever in every case is the same MI W-4P exemption claim, renewed with the custodian that holds the traditional IRA. Custodians without Michigan taxing jurisdiction — many national brokerages among them — are not required to withhold at all; where nothing is withheld, Treasury points taxpayers to estimated payments instead.

Why it matters on a conversion specifically: the withheld slice goes to Lansing instead of the Roth. On a $100,000 conversion with 4.25% withheld, $4,250 never gets converted — federally it is just a distribution, taxable as ordinary income, and for a converter under 59½ exposed to the 10% early-distribution tax on top. Michigan itself adds no state early-withdrawal penalty — there is no state analogue to §72(t) — so the state-side cost of an early conversion is the 4.25% plus the lost subtraction, but the federal leak from in-conversion withholding is pure waste for anyone who can pay the tax from outside the IRA.

Paying as you go runs through Form MI-1040ES once the expected balance due passes $500. The safe harbors mirror federal law, including the tier North Carolina, one state back in this series, lacks: 90% of current-year tax, 100% of prior-year tax, or 110% of prior-year tax if prior-year AGI exceeded $150,000 ($75,000 married-separate). A fourth-quarter conversion is manageable: an income change between September 1 and December 31 requires only a single payment by January 15, 2027, and even that voucher can be skipped by filing the 2026 return and paying in full before February 1, 2027. Miss both and the penalties are concrete — 25% (minimum $25) for failing to file estimates, 10% (minimum $10) for underpaying, plus interest at one point above adjusted prime — with Form MI-2210’s annualization method available for income that arrived unevenly.

Authority: MCL 206.703 (2011 PA 38); Form MI W-4P (4924) and instructions; 2026 Form 446 Withholding Guide; Merrill State Tax Withholding Rates (rev. 7/26); Fidelity/NFS form 1.964543.110 (01/26); MCL 206.301; 2026 Form MI-1040ES; Form MI-2210; RAB 2021-17

Twenty-four cities, one ordinance — and an exemption everyone half-knows

North Carolina, one state back in this series, had no local income tax anywhere in the state; Ohio, two back, ran every paycheck through three layers. Michigan sits between them, and its local layer is the most misread thing on this page. Twenty-four Michigan cities levy an income tax, and all twenty-four levy it under the same text: the Uniform City Income Tax Ordinance, which the City Income Tax Act (1964 PA 284, MCL 141.501 et seq.) requires every taxing city to adopt. Detroit is the ceiling — 2.4% on residents, 1.2% on nonresidents for 2026, per the city’s withholding guide (Form 5469) and the return instructions that apply those rates line by line, with statutory authority at MCL 141.503(2)(d) — and Detroit’s is the one city return the Michigan Department of Treasury administers itself. The other twenty-three, Grand Rapids to Flint to Saginaw, self-administer, most at the ordinance default of 1% on residents and 0.5% on nonresidents, a handful statutorily authorized higher. One contingency worth a parenthesis: MCL 141.503(2)(e) steps Detroit down to 2.20%/1.10% once the city’s lighting-authority debt is fully repaid; the 2025 instruction book confirms 2.4%/1.2% remain in force.

Two structural facts frame everything below. First, residency does the heavy lifting: a resident of a taxing city owes city tax on all taxable income, while a nonresident owes it only on compensation and business income earned inside the city — so an IRA distribution is a resident’s question, not a commuter’s. Second, the exemption everyone half-knows: MCL 141.632, the ordinance’s exemption list, binds all twenty-four cities and excludes at (b) “Proceeds of insurance, annuities, pensions and retirement benefits.” That clause is why nearly every summary of Michigan city tax tells retirees the city layer never touches retirement money. Half right — the statute exempts retirement benefits, but Detroit’s own instructions tax distributions taken early, before retirement age, and what counts as a “retirement benefit” turns out to carry an age test.

Authority: MCL 141.501 et seq. (1964 PA 284); MCL 141.503(2)(d)–(e); MCL 141.632(b); Michigan Treasury city-income-tax page (“Twenty-four Michigan cities”); 2026 Form 5469 (City of Detroit withholding guide); 2025 Form 5313 City Income Tax book (Form 5120, Line 34)

Can a Michigan city tax a Roth conversion? Detroit’s forms answer: before 59½, yes

The line is drawn in the City of Detroit’s own instruction book — the 2025 Form 5313 City Income Tax volume, published and administered by Michigan Treasury — and it is drawn three times. The resident return’s list of nontaxable income exempts “Pensions and annuities, including disability pensions” and appends, in parentheses most readers skip: “(Pre-retirement distributions are taxable.)” The resident retirement-subtraction line (Form 5118, Line 30) orders: “Do not deduct benefits distributed early.” And the part-year form says it with an age: “Residents should report any early distribution from an Individual Retirement Account (IRA) received before age 59 1/2” (Form 5120, Line 16).

Now run a Roth conversion through that machinery. A conversion is an IRA distribution, and Detroit’s resident return is AGI-based — Form 5118 starts from the federal return (“Enter your AGI”, Line 9) — so conversion income enters the city base automatically and leaves only through the retirement-subtraction line, the very line that refuses benefits distributed early. A Detroit resident who converts $100,000 before reaching 59½ owes the city 2.4% — $2,400 — on top of the state bill, because at both layers an under-59½ conversion is fully taxable with no subtraction. The same conversion executed at or after 59½ falls within the exempt retirement-benefit category, and the city collects nothing. The city layer, in other words, tracks the same 59½ date-of-distribution gate as the state subtraction — it does not switch off for retirement money categorically; it switches off at 59½.

The Detroit analysis generalizes. All twenty-four taxing cities operate on the ordinance’s uniform definitions, so the same age split runs through Grand Rapids, Flint, Lansing and the rest at their lower rates — a 1% city prices the same under-59½ conversion at $1,000 per $100,000. And it generalizes in the other direction too: a nonresident who merely works in a taxing city has no city exposure on a conversion at any age, because the ordinance reaches nonresidents only on income earned inside the city.

Authority: 2025 Form 5313 City Income Tax book — Form 5118 nontaxable-income list, Form 5118 Line 30, Form 5120 Line 16; MCL 141.632(b); MCL 141.612–.613 (resident/nonresident scope)

$6,650 at 58, $0 at 60: the same conversion, priced by its date

Stack the two layers and the page’s defining number falls out. Take a married Detroit couple converting $100,000 with no other retirement income. At age 58, neither layer relents: the state subtraction is closed — MCL 206.30(8)(a)(ii) admits IRA distributions only “if the distributions are not made until the participant has reached 59-1/2 years of age,” measured at the date of the distribution, with only death, disability and substantially-equal-payment exceptions — and the city taxes the conversion as a pre-retirement distribution. The bill is 4.25% plus 2.4%: $6,650, with no subtraction at either layer.

At age 60 the same conversion costs $0. Past 59½, Treasury’s own FAQ answers the question by name — a conversion “qualifies for the pension subtraction, within the limitations of the statute, if the individual is at least 59 1/2 years of age when the rollover occurs” — and RAB 2017-21 §A(3), Example 3, walks a taxpayer through converting an entire traditional IRA at age 60 and subtracting it. For a converter who has reached 59½, the 2026 limits are $67,610 for single filers and $135,220 for joint filers (2026 Form 446 and the current MI W-4P), shared per return with all other retirement and pension benefits — a spouse already subtracting a $50,000 pension leaves only the remainder for conversion income. Our couple’s $100,000 fits inside $135,220, so the state collects nothing; the city, which exempts retirement benefits taken at or after 59½, collects nothing either.

That is a $6,650 spread on identical dollars, decided entirely by the conversion date — not the amount, not the account, not the ZIP code. A single filer past 59½ converting the same $100,000 shelters the first $67,610 and owes about $1,377 on the excess, still city-free; the same single filer at 58 owes $6,650 in Detroit and $4,250 anywhere else in Michigan, because under 59½ the conversion is fully taxable with no subtraction anywhere. Of the ten states this series has covered so far, Michigan is the only one where the entire state-and-local cost of a conversion pivots on a single half-birthday: Georgia gates its exclusion at 62, but no other state stacks a city layer that gates on the same age. Waiting from 58 to 60 is worth $6,650 per $100,000 to that Detroit couple. That is arithmetic, not a recommendation — the federal side of a conversion still swings more dollars than the state side, and when to convert is a question this page prices but does not answer.

Authority: MCL 206.30(8)(a)(ii); Michigan Treasury Roth IRA conversion FAQ; RAB 2017-21 §A(3) Example 3; 2026 Form 446 (Rev. 02-26) and Form MI W-4P instructions ($67,610/$135,220 caps on the 59½+ subtraction); MCL 206.51(1)(b) and the April 15, 2026 rate determination (4.25%); 2025 Form 5313 book, Forms 5118/5120

Going in, both layers charge the Roth chooser — Detroit is not Ohio

The contribution side has none of the exit side’s mercy. Michigan taxable income starts from federal AGI (MCL 206.30(1)) with no retirement-contribution adjustment in either direction, and RAB 2017-21 §A(1) states both halves: pre-tax contributions reduce the Michigan base only because they reduce AGI, and “contributions made to a Roth IRA are not deductible.” So a full $24,500 pre-tax 401(k) deferral escapes the 4.25% flat tax entirely, while the same deferral designated Roth costs $1,041.25 of state tax in the deferral year. The IRA pair splits the same way at one-third scale: a deductible traditional IRA contribution saves $318.75 on a full $7,500, a Roth IRA contribution saves nothing and comes from income taxed $318.75 — Treasury’s FAQ is one sentence: the Income Tax Act “does not provide for the subtraction of contributions to Roth IRAs.”

The city layer doubles the pattern — and this is where Michigan breaks from Ohio, the series’ other city-tax state. Ohio’s municipalities tax “qualifying wages,” the Medicare-wage box, which includes pre-tax 401(k) deferrals — both deferral types paid municipal tax there, so the local layer was neutral on the Roth choice. Michigan’s cities tax compensation “to the same extent and on the same basis that the income is subject to taxation under the federal internal revenue code” (MCL 141.612), and Detroit’s City Schedule W (Form 5121) implements that by collecting wages from Box 1 of the W-2 — the box a pre-tax deferral never enters and a Roth deferral always does. A pre-tax deferral therefore escapes city tax; a full $24,500 Roth deferral costs a Detroit resident another $588 at 2.4%. Combined state-plus-city drag on the Roth chooser: 6.65%, or $1,629.25 on a full deferral — against $0 for pre-tax.

The IRA choice is Roth-penalizing at the city layer too, which surprised us: we expected instruction-book silence to make it neutral. Form 5118, the resident return, starts from federal AGI, and its additions list — self-employment tax, HSA deductions, student-loan interest and the rest — contains no add-back of the federal §219 IRA deduction, so a deductible traditional IRA contribution reduces the Detroit base automatically, worth $180 at 2.4% on a full $7,500. For nonresidents the deduction is express: “Contributions to an Individual Retirement Account may be deducted” (Form 5119, Line 29). A Roth IRA contribution gets nothing at either layer.

Going-in cost at TY2026 rates for a Detroit resident; the other 23 taxing cities scale the city column to their own rates. The exit side runs the other way: qualified Roth withdrawals never enter either base, while pre-tax money comes out through the state’s 59½-gated subtraction and the city’s retirement-benefit exemption — both covered above.

Authority: MCL 206.30(1); RAB 2017-21 §A(1); Michigan Treasury Roth IRA contributions FAQ; MCL 141.612–.613; City of Detroit Form 5121 (City Schedule W); 2026 Form 5469 (2.4%/1.2%); 2025 Form 5313 book — Form 5118 Part 4 additions, Form 5119 Line 29

Does the conversion torpedo your Social Security? Federally maybe — in Michigan, no

One conversion side-effect that does not survive the trip to the Michigan return: the Social Security “torpedo.” Federally, a large conversion raises provisional income and can drag up to 85% of a retiree’s Social Security benefits into AGI under IRC §86 — income that would otherwise have gone untaxed, which is why the effect carries an artillery nickname. Michigan starts from that inflated AGI, but MCL 206.30(1)(f)(iii) deducts “Social Security benefits as defined in section 86 of the internal revenue code” to the extent they landed in AGI — the entire AGI-included amount comes back out on Michigan Schedule 1. The torpedo raises the federal bill; on the state return the same dollars are deducted again, in full.

Two structural details make that cleaner than it had to be. The Social Security deduction does not draw down the retirement-subtraction ceiling — the $67,610 single / $135,220 joint cap that shelters a 59½-or-older converter is reduced by military, railroad and public-safety amounts subtracted, but not by Social Security. And the deduction has no income test, no age tier, no phase-out. The combined effect for a Michigan retiree past 59½ and inside the cap is a state layer that is close to indifferent among the big three: traditional withdrawals, conversion income and Social Security are all state-tax-free within the limits. What the Roth still buys at the state layer sits at the margins — conversion amounts above the cap, and the fact that the flat 4.25% never touches Roth earnings at all. An under-59½ converter, as this page keeps repeating, gets none of this: the conversion is fully taxable with no subtraction, whatever it does to Social Security federally.

Authority: MCL 206.30(1)(f)(iii); IRC §86; Michigan Treasury taxpayer notice, Nov. 17, 2025 (Social Security deduction mechanics); MCL 206.30(10)(d) (cap applies to subsection (1)(f)(i)–(ii) benefits only)

The anti-Bailey: Michigan looks through the rollover — to give, and to take away

One state ago in this series, North Carolina destroyed a tax exemption the moment protected money touched a private IRA. Michigan runs the identical fact pattern to the opposite conclusion — source character survives the rollover, for the taxpayer who kept the records to prove it — making it the first character-preservation state of the ten covered so far. The case is Magen v Department of Treasury, 299 Mich App 566; 830 NW2d 807 (2013), published and still controlling: a Michigan State University employee rolled his 403(b) — public-university retirement money, then fully subtractable — into a private IRA, and Treasury denied the subtraction on the IRA’s distributions. The Court of Appeals looked through the account to its funding source. The trial court it affirmed had put the point plainly: by moving his retirement account, Magen “did nothing to change [the monies’] character as ‘benefits.’” The syllabus states the holding — distributions from a private IRA are “fully deductible from state income taxes if the principal of the IRA wholly originated in a nontaxable 403(b) public retirement account” — and the majority supplied the sentence that organizes everything Treasury has published since: an IRA is “a vehicle to defer taxes due, not to create taxes where none exist.”

Treasury no longer resists the rule; it administers it, and it has extended it to conversions by name. RAB 2026-1, the controlling retirement-income guidance approved January 8, 2026, restates Magen and adds: “This is true regardless of the type of IRA into which those funds were converted (i.e., traditional or Roth). The tax-deductible character of the original retirement plan survives the rollover.” In the same passage sits the condition that decides whether the rule is usable at all: a taxpayer claiming the subtraction may be required to produce complete account documentation — the source, timing, and amount of the rollover, plus a statement of post-rollover contributions and accrued earnings. Those records are not bookkeeping trivia, because the account is layered: direct contributions made after the rollover, private-source money commingled in, and all post-rollover earnings are private benefits, capped at the ordinary maximum — $67,610 single, $135,220 joint for 2026, and only for distributions taken at or after 59½ — while the documented public principal alone keeps its public character. Who still needs the rule, now that the general subtraction is birth-year-blind? Two cohorts, and only two: public-safety retirees, whose qualifying public benefits are deductible without limit under MCL 206.30(11), and filers born before 1946, whose public benefits are likewise uncapped. For those two, tracing is what rescues dollars above the general ceiling. For everyone else born after 1945, public-source and private-source benefits share the same $67,610 / $135,220 ceiling under MCL 206.30(10)(d) — a ceiling that, for IRA money, opens only at 59½ either way — so a documented public origin changes the label and not the tax. The rule carries the source’s conditions with it rather than the IRA’s: a Magen-based claim stays subject to the qualifying-distribution rules and limits that would have governed the source funds (RAB 2017-21), and no published guidance says how that interacts with the IRA-specific 59½ test, and an ordinary private-source conversion still rides on the 59½ date-of-conversion test covered earlier on this page — convert before that date and the conversion is fully taxable, with no subtraction and no records that can cure it.

Read the doctrine in both directions, because Treasury does — the same look-through that rewards records also denies. RAB 2017-21, the bulletin that operationalized the case, warns that “the holding in Magen may require that subtractions for otherwise qualifying distributions be denied,” because the Department “is required to look through to the original source of funds” whenever a retirement account has been rolled into a traditional or Roth IRA. Its Example 1 is the mirror image of the case: a taxpayer funds a traditional IRA by rolling over a 457 deferred-compensation plan, takes an IRA distribution at 64 — past every age gate, from an account type that ordinarily qualifies — and is denied, because “the subtraction is not available where the source of the distribution is an otherwise-taxable IRC 457 plan.” The rule cuts both ways: public money with records keeps its subtraction inside a private IRA, and non-subtractable 457 money stays non-subtractable there too. Michigan does not launder taxable-source dollars into subtractable IRA dollars; it remembers what they were.

Set the two states side by side, because the doctrines are exact opposites on the identical fact pattern — one turns on the paperwork, the other refuses to look at it. North Carolina destroys: NCDOR’s rule is that Bailey-protected benefits rolled into an IRA “lose their character” — permanently, with no tracing, no cure and no records that revive it, because no IRA can ever be a qualifying Bailey account. Michigan preserves: the documented principal keeps its source character, provided the source, timing, and amount are recorded — though every dollar of post-rollover earnings converts to a private, capped benefit, which makes the rollover cheap rather than free. A federal retiree who internalized the North Carolina lesson — never let protected money touch an IRA — will forgo a consolidation that in Michigan costs only that earnings layer; a pre-1989-vested federal retiree who internalized the Michigan rule — the rollover is safe if the file is kept — will destroy a Bailey exemption within a week of unpacking in Raleigh. Neither instinct survives the state line. Only the record-keeping habit does.

Authority: Magen v Department of Treasury, 299 Mich App 566; 830 NW2d 807 (2013) (published); RAB 2026-1 Issue 8 (approved Jan. 8, 2026); RAB 2017-21 and its Example 1; MCL 206.30(8)(d)(i)(A), (11); NCDOR Bailey Decision filing-topic page (the North Carolina contrast)

The $71,500 line: a conversion can erase the same year’s property-tax credit

Michigan’s property-tax relief is not a county exemption application; it is a refundable credit computed on the state income-tax return — Form MI-1040CR — open to homeowners and to renters, who count 23% of rent as deemed property tax. The tax-year-2025 parameters, the latest published (all three are CPI-indexed annually, and the TY2026 forms are not yet out): maximum credit $1,900; total household resources — THR — of no more than $71,500; and taxable value of the homestead no more than $165,400, a hard disqualifier the instructions enforce with a stop instruction rather than a phase-out General claimants receive 60% of the amount by which property taxes exceed 3.2% of THR; claimants 65 and older use a senior table that pays 100% of the excess at THR of $21,000 or less, sliding to 60% between $30,001 and $71,500.

What makes this a Roth page’s business is the income definition. THR is “all income received by all persons of a household,” and income means federal AGI “plus all income specifically excluded or exempt from the computations of the federal adjusted gross income” (MCL 206.508(4), 206.510(1)) — a receipts-style test, the second of the ten states this series has covered so far. Line 18 of the form sweeps in all annuity, pension, and IRA benefits, and its rollover carve-out carves conversions back in: “amounts rolled over into a Roth IRA must be included to the extent included in AGI.” The timing is cleaner than North Carolina’s one-year lag: the 2026 credit is tested against 2026 THR, so a 2026 conversion costs the 2026 credit and no other. And the edge is a slide rather than a wall — the computed credit is reduced 10% for every $1,000 (or part) of THR above $62,500, reaching zero above $71,500 — but the band is only $9,000 wide, and a conversion of any consequential size blows straight past all of it. One more asymmetry: the look-through from the section above stops at this door. RAB 2017-21 confines the character rule to the taxable-income computation — it “does not apply to the calculation of THR” — so even public-source money with perfect records counts here.

Numbers make the mechanism legible. A 65-year-old homeowner with $60,000 of THR and $4,000 of property taxes computes ($4,000 − 3.2% × $60,000) × 60% = $1,248 of refundable credit. Add a $30,000 conversion and THR lands at $90,000, past the $71,500 TY2025 ceiling, itself CPI-adjusted each year: credit $0. Even a $5,000 conversion cuts deep — THR $65,000 is three $1,000 steps into the slide, and the credit drops to about $806. The forfeited credit is not a tax at 4.25%; it is a benefit lost at 100 cents on the dollar, stacked on whatever the conversion itself costs.

Authority: MCL 206.520, 206.522, 206.508(4), 206.510(1); 2025 MI-1040CR instructions, line 18 and Table B; RAB 2017-21 (THR limitation)

Does tax-free Roth money count toward THR? Yes — the instructions name it

North Carolina left this question to inference from a receipts definition and a silent form. Michigan wrote it down. The MI-1040CR line 18 instructions: “You must include any part of a distribution from a Roth IRA that exceeds your total contributions to the Roth IRA regardless of whether this amount is included in AGI. Assume all contributions to the Roth IRA are withdrawn first.” Both halves arrive in the same breath, and both matter. The first captures the earnings portion of even a fully qualified, federally tax-free Roth withdrawal — “regardless” of AGI is the receipts test operating on Roth money by name. The second is the ordering rule that keeps the first from overstating: every dollar up to cumulative contributions comes out THR-free, and only past that line does each further dollar count against the $71,500 limit. The instructions close the remaining exit too: “Losses from Roth IRAs cannot be deducted.”

The consequence lands on exactly the household that believes it has no income. A retiree living on qualified Roth withdrawals reports $0 of federal taxable income and $0 of Michigan taxable income — and once those withdrawals have moved past cumulative contributions into earnings, the earnings stack into THR and can forfeit a credit worth up to $1,900. This is the series’ second receipts-style means test after North Carolina’s $38,800 property-tax line, and Michigan’s stands on firmer footing: North Carolina’s form never mentions Roth accounts, so the question there lives on inference; Michigan’s instructions name Roth IRAs, supply the ordering rule, and bar the loss deduction. In a receipts test, nothing is invisible — not even money the federal code calls tax-free.

The same THR definition gates a second, lower-income benefit: the Home Heating Credit (Form MI-1040CR-7), federally funded through the LIHEAP block grant and claimable with or without an income-tax return — for 2025, until September 30, 2026. Its ceilings are hard, not sliding: THR of $17,243 for a household with zero or one exemption (standard allowance $604), $23,271 for two ($815), $29,329 for three ($1,027) — one dollar over the applicable ceiling ends the standard allowance outright. Conversion planning rarely coexists with income this low, but RMD-driven traditional-IRA distributions trip these ceilings routinely, and the timing mechanism is the same as the credit above: dollars count in the year received, so identical dollars land differently depending on whether they arrive in a benefit year or in a year before benefits are claimed.

Authority: 2025 MI-1040CR instructions, line 18; MCL 206.508(4), 206.510(1), 206.527a; 2025 MI-1040CR-7 instruction booklet, Table A

529s, Medicaid, and the auto-IRA that passed the Senate

Michigan’s 529 deduction carries a netting quirk. MCL 206.30(1)(t)(i) allows up to $5,000 single / $10,000 joint per year (not indexed) — but the deductible amount is contributions minus same-year qualified withdrawals, computed account by account with a floor of zero. A family that contributes $8,000 to a Michigan Education Savings Program account in the same year it withdraws $6,000 for tuition deducts $2,000, not $8,000. The companion add-back, MCL 206.30(1)(u), recaptures non-qualified withdrawals to the extent of deductions taken in the current and all previous years.

That add-back is why the SECURE 2.0 §126 rollover — moving a seasoned 529 into the beneficiary’s Roth IRA — is Michigan’s open question, and officially so: the program’s own disclosure document (MESP Program Description, Supplement No. 5, July 1, 2026) says the treatment is “[p]ending a determination by Michigan authorities” — it is unclear whether the rollover will be treated as a non-qualified withdrawal that triggers the deduction recapture. The statute keeps the question genuinely open: MCL 390.1472(n)’s exclusive qualified-withdrawal list was amended as recently as 2024 PA 195, after SECURE 2.0, without adding a Roth-rollover category. The income side, by contrast, is clean — A compliant rollover is federally tax-free, so nothing lands in federal AGI — and because Michigan starts from AGI and its conformity baseline is the IRC in effect on January 1, 2025 (MCL 206.12(3)), which already contains §126, nothing lands in Michigan taxable income either. The live exposure the disclosure names is recapture of previously deducted contributions; whether a non-qualified characterization would also pull the earnings slice into Michigan income is equally unaddressed. This page states neither direction as settled, because neither is.

Michigan has no auto-IRA, but the absence is unusually live. Senate Bill 807, the Michigan Secure Retirement Savings Program, passed the Senate 20–18 on June 17, 2026 and was referred the same day to the House Committee on Economic Competitiveness, where it sat at the summer adjournment; companion House bills HB 5335 and 5336 are also pending. As drafted, the program would reach employers with one or more employees, at least 730 days in business and no retirement plan, with automatic enrollment, an any-time opt-out, and board-set default and escalation rates (default capped at 15% of wages). Notably, HB 5336 defines the account as either a traditional IRA or a Roth IRA and leaves the default to the board — so the excess-contribution trap that OregonSaves-style Roth-default programs spring on auto-enrolled earners above the Roth MAGI phase-out is contingent twice over here: on enactment, and on the board’s choice. That is a status report, not a forecast.

For public employees, the Roth menu widened recently. The State of Michigan 401(k) and 457 plans (Office of Retirement Services, Voya recordkeeping) include a Roth 401(k), and since September 22, 2025 the State of Michigan Roth 457 is open to all MPSERS school employees, working retirees included. It takes employee post-tax money only — “employer mandatory and matching contributions are pretax only and continue to go to the member’s 401(k) Plan.” The 457 exclusion from the section above gives that election unusual stakes in this state: pre-tax 457 money comes out federally taxed and Michigan-taxed with no retirement subtraction at any age, while Roth 457 money, once qualified, never enters AGI and never meets the Michigan return at all.

Medicaid long-term care is the harsh column of Michigan’s report card. The state counts IRAs and Roth IRAs as available assets at “the amount of money the person can currently withdraw,” deducting “any early withdrawal penalty, but not the amount of any taxes due” (Bridges Eligibility Manual, BEM 400), against a $2,000 asset limit for a single long-term-care applicant. There is no payout-status disregard of the kind Florida and Texas applied earlier in this series — taking regular distributions does not move the account off the resource ledger, and the Roth’s no-RMD feature earns nothing here. Distributions are countable unearned income besides (BEM 503). For a married applicant, the community spouse’s protected amount runs from a $32,532 minimum to a $162,660 maximum for 2026 (BEM 402) — and because retirement accounts are countable, the community spouse’s own IRA consumes that headroom rather than sitting outside it.

The estate column, by contrast, is empty in the reader’s favor. Michigan’s inheritance tax survives only for deaths on or before September 30, 1993; the replacement estate tax is a pure federal pick-up that has computed to zero for deaths after December 31, 2004 and was never decoupled; and no gift-tax act appears anywhere in the MCL or in Treasury’s own inventory of the taxes it administers — with no operative estate tax, there is nothing for a lifetime-gift addback to attach to. An inherited Roth passes to Michigan beneficiaries with zero state death-tax friction; only the federal rules apply.

Authority: MCL 206.30(1)(t)–(u); MCL 390.1472(n) (as amended by 2024 PA 195); MESP Program Description, Supplement No. 5 (July 1, 2026); MCL 206.12(3); 2026 SB 807; 2025 HB 5335–5336; ORS Public School Reporting Units manual §6.03.06; MDHHS BEM 400, 402, 503; MCL 205.201 et seq.; MCL 205.232(1)

Creditor protection: no dollar cap, and a 120-day trapdoor

Michigan reaches a Roth by cross-reference rather than by name. MCL 600.6023(1)(j) exempts “an individual retirement account or individual retirement annuity as defined in section 408 or 408a of the internal revenue code… and the payments or distributions” from it — the §408A citation added in 1998 PA 61 — and states that the exemption “applies to the operation of the federal bankruptcy code.” Outside bankruptcy the chapter’s lead-in supplies the reach: a judgment debtor’s listed property is “exempt from levy and sale under an execution.” No dollar limit appears in the subdivision. One citation trap: this was 600.6023(1)(k) until 2012 PA 553 relettered the subsection, moving IRAs to (1)(j) and employer plans into the (1)(k) slot, so pre-2013 authorities citing (1)(k) for IRA protection now point at the employer-plan paragraph.

Then the carve-out that makes Michigan unusual, present in both state lists: the exemption “does not apply to any amounts contributed… if the contribution occurs within 120 days before the debtor files for bankruptcy.” The trigger is narrow by its own terms — the clock runs backward from a bankruptcy filing, and outside bankruptcy there is no filing to measure from, leaving eve-of-judgment funding to the voidable-transactions act. Neither statute defines “contributed.” Subparagraph (iii) of each carves §401(a) and §403(b) rollovers out of a different limitation, implying that rollovers are otherwise contributions — on that reading a large plan-to-IRA rollover, or a Roth conversion, completed inside the window is exposed. No published Michigan decision resolves it: a live textual question, not a rule.

Michigan never opted out, which is the sidestep. Its bankruptcy statute offers property exempt “under federal law or, under 11 USC 522(b)(2), the following property” — three schemes, elected whole. Federal: §522(d)(12) and §522(b)(3)(C) protect tax-exempt retirement funds with no contribution lookback, and §522(b)(4)(C)–(D) protect eligible rollovers expressly, subject only to the §522(n) cap of $1,711,975 on contributory amounts for cases filed through March 31, 2028. MCL 600.6023: the general list, open to every judgment debtor. MCL 600.5451: bankruptcy-only, and the strongest text in the state — it protects “all individual retirement accounts, including Roth IRAs,” and was upheld as “constitutionally sound” in In re Schafer, 689 F.3d 601 (6th Cir. 2012).

Because schemes cannot be mixed, escaping the clawback costs a homeowner the homestead. The statutory base in MCL 600.5451(1)(m) is $30,000, or $45,000 at 65 or older or disabled; CPI-adjusted, the figures for cases filed on or after April 1, 2026 are $51,150 and $76,725.

Authority: MCL 600.6023(1)(j) (formerly (1)(k)), am. 1998 PA 61, 2012 PA 553; MCL 600.5451(1), (1)(k), (1)(m), (4); MCL 566.31 et seq.; 11 U.S.C. §522(b)(2), (b)(3)(C), (b)(4)(C)–(D), (d)(12), (n); In re Schafer, 689 F.3d 601 (6th Cir. 2012); Michigan Treasury bankruptcy notice (Jan. 30, 2026)

Three asterisks on a strong statute, and none of them tested

The first is a grammatical accident. Outside bankruptcy the statute protects “an individual retirement account” — singular — and in In re Spradlin, 231 B.R. 254 (Bankr. E.D. Mich. 1999), construing the paragraph as then lettered, the court read the article literally: one IRA exempt, not all of them. The legislature later wrote “all individual retirement accounts, including Roth IRAs” into the bankruptcy-only list and left the general statute’s singular alone, so the contrast sits on the books for a creditor to argue. Spradlin is a single bankruptcy-court decision with no Michigan appellate authority behind it, then or since: the reading is unsettled.

The second, read literally, would erase what the same statutes grant by name. Both deny the exemption where contributions and their earnings “exceed, in the tax year made or paid, the deductible amount allowed under section 408 of the internal revenue code,” excepting only §401(a) and §403(b) rollovers. Roth contributions are never deductible, so reading that clause as the amount actually deducted would strip protection from every Roth dollar — colliding with 600.5451(1)(k)’s “including Roth IRAs” and 600.6023(1)(j)’s own §408A reference, which the harmonizing reading avoids by treating the clause as a cap at the annual contribution limit aimed at excess contributions. No published Michigan or Sixth Circuit decision construes it as applied to a Roth: textual risk, not the rule. A converted balance sits in that blind spot twice, arguably a “contribution” and outside a carve-out naming only §401 and §403(b) sources.

The third is inherited accounts, where the honest answer is a gap. After Clark v. Rameker, 573 U.S. 122 (2014), an inherited IRA is not “retirement funds” federally, which sends the question to state law — and neither Michigan statute mentions inherited or beneficiary accounts. North Carolina, one state back in this series, amended its statute to cover them by name; Michigan never did, and no published Michigan or Sixth Circuit decision has applied either statute to an inherited IRA since Clark. A surviving spouse who rolls the account into her own holds ordinary retirement funds and keeps the federal route; for a non-spouse beneficiary the question is open. Both statutes settle one thing expressly: they yield to orders “pursuant to a judgment of divorce or separate maintenance” and to child-support orders, with division running on IRC §408(d)(6), a transfer incident to divorce, since a QDRO is an ERISA-plan device.

Authority: MCL 600.6023(1)(j), (j)(i)–(iii); MCL 600.5451(1)(k), (k)(i)–(iii); In re Spradlin, 231 B.R. 254 (Bankr. E.D. Mich. 1999); Clark v. Rameker, 573 U.S. 122 (2014); IRC §§408, 408A, 408(d)(6)

Wintering in Florida does not make you a part-year resident

Michigan answers the snowbird question in its own instruction book: “A temporary absence from Michigan, such as spending the winter in a southern state, does not make you a part-year resident.” Sign conversion paperwork from a Florida condo in February while the Michigan house waits, and every dollar is Michigan income. Domicile ends only when replaced, and Treasury requires all three legs at once — it “is not lost until there is a concurrence of all the following: 1. The specific intent to abandon the old domicile 2. The intent to acquire a specific new domicile 3. Actual physical presence in the new state of domicile.” The factors run to possessions, family, voting, automobile licenses, mailing address, banking and business, and “no one of these factors is controlling”; when a return raises the question, Treasury sends Form 3799 to ask.

Two differences from the state this series opened with. Michigan publishes no nonresident audit guidelines, no day-counting manual and no convenience doctrine — that one page of Tax Text guidance, the rule it tracks (R 206.5) and the statute are the whole corpus. And its day count deems domicile: someone who “lives in this state at least 183 days during the tax year… shall be deemed a resident individual domiciled in this state,” with no permanent-place-of-abode element, no statutory-resident category and no 548-day rule. New York can make a person a resident on an abode plus a day count while the domicile stays elsewhere; Michigan relocates the domicile itself.

In the move year the distribution date controls to the day. Statuses are computed separately, and Schedule NR line 10 — pensions, annuities, IRA distributions, 1099-R income — asks in Column B for “the income received while a Michigan resident,” the MI-1040 book stating the rule generally: 1099-R deferred compensation is “allocated to the state of residence when received.” A conversion is all-in or all-out — the day before the domicile change it is fully Michigan; the day after, none of it.

Reciprocity is the over-extension to kill early. The agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin mean only that “Michigan residents pay only Michigan income tax on their salaries and wages earned in any of these states,” the enabling statute authorizing agreements as to “income earned for personal services performed” (MCL 206.256) and nothing else. None mentions an IRA distribution or a conversion.

For the completed leaver, federal law does the work. 4 U.S.C. §114(a) bars any state from taxing “retirement income of an individual who is not a resident or domiciliary,” and §114(b)(1)(E) reaches “an individual retirement plan described in section 7701(a)(37)” — which covers a conversion, taxed as a distribution from the traditional IRA. Michigan acknowledges the preemption by name, the Treasury Tax Text stating that “Federal law 4 USC 114 prohibits a state from taxing certain deferred compensation distributions received by a nonresident.” Custodians do not read statutes, though: a payor with Michigan jurisdiction keeps withholding until the mover returns an MI W-4P “indicating you are not a resident of Michigan” and marks box 1.

Arrivers get what several states in this series withhold: no vesting cohort, no in-state-service test, no residency-duration gate, and from tax year 2026 no birth-year requirement — the subtraction applies “regardless of year of birth” up to the indexed private-retirement maximum. Move to Traverse City on December 1, take a qualifying distribution on December 15, and you claim what a lifelong resident claims, where North Carolina’s Bailey exclusion — frozen to a cohort vested by August 1989 — can never admit a new member. Out-of-state public pensions qualify here too, capped at that same private maximum rather than deducted without limit.

Authority: MCL 206.18(1)(a); Mich. Admin. Code R 206.5; 2025 MI-1040 Instruction Book, “Residency” and “Reciprocal States” (p. 6); 2025 Michigan Treasury Tax Text (pp. 73, 91); Form 3799; 2025 Schedule NR instructions, line 10; MCL 206.256; 4 U.S.C. §114(a), (b)(1)(E); IRC §§7701(a)(37), 408A(a); Form MI W-4P (4924); RAB 2026-1

What does one $100,000 conversion actually cost in Michigan?

Five answers from the same $100,000 at the same flat 4.25%, separated by the converter’s age on the distribution date and, once, by an address. The retirement subtraction reaches an IRA distribution only where, in the statute’s words, distributions “are not made until the participant has reached 59-1/2 years of age” (MCL 206.30(8)(a)(ii)), and Treasury’s Roth FAQ applies that gate to conversions by name. Inside it, the TY2026 subtraction shelters up to $67,610 single or separate and $135,220 joint — same 59-1/2 test either way, per return rather than per spouse. Outside it, a conversion is an early distribution: fully taxable, no subtraction, city-taxable on top where a city taxes income.

Read it as a spread. For a 59½-or-older retiree whose conversion fits inside the caps Michigan already charges nothing, so leaving saves nothing on the conversion; the move pays only where the converter is under 59½, converting above the caps, or already spending the allowance on a pension. A mover’s clocks also run at different speeds: bankruptcy exemptions follow 11 U.S.C. §522(b)(3)(A)’s 730-day domicile lookback, so someone who left eighteen months before filing may still be judged by Michigan’s lists.

Authority: MCL 206.30(8)(a)(ii), (1)(f); 2026 Michigan Income Tax Withholding Guide (Form 446, Rev. 02-26); MCL 206.51(1)(b) (flat 4.25% rate); RAB 2026-1; Michigan Treasury Roth IRA FAQ; 2025 Tax Text 1099-R distribution-code chart; MCL 141.632(b) with the 2025 Form 5313 City Income Tax book (Forms 5118, 5120); 4 U.S.C. §114; 11 U.S.C. §522(b)(3)(A)

A disaster relief window that closes December 26, 2026

Michigan has an open federal window as this page publishes, and it is dated. FEMA declaration DR-4925-MI covers the severe storms, tornadoes and flooding of April 10–21, 2026, was declared June 30, 2026, and designates 37 counties. Under SECURE 2.0 §331, codified at IRC §72(t)(11), a qualified individual — principal abode in the disaster area during the incident period, plus economic loss — may take up to $22,000 per disaster from IRAs or plans free of the 10% early-distribution tax, spread the income ratably over three years, and repay it within three years on Form 8915-F, which unwinds the tax. The window runs until — but not including — the date 180 days after the applicable date, here the June 30 declaration, which makes the last day December 26, 2026. For Roth owners the use is narrow but real: the exception reaches a pre-59½ withdrawal of converted amounts or earnings that would otherwise be penalized.

Authority: SECURE 2.0 §331; IRC §72(t)(11) (180-day window; last day December 26, 2026); FEMA DR-4925-MI (declared June 30, 2026; incident period April 10–21, 2026); IRS Michigan disaster-relief news release (deadlines postponed to Nov. 2, 2026); Form 8915-F

Michigan against the nine states already in this series

Two rows are Michigan’s alone. It is the only state of the ten covered so far in this series whose conversion cost is age-gated at both layers — Georgia gates at 62 and Michigan at 59½, but only Michigan adds a city income tax swinging on the same age, so a Detroit resident’s bill moves $6,650 between one birthday and the next while the amount converted never changes. It is also the only one of the ten covered so far that carries the tax character of the original plan through a rollover into an IRA: North Carolina destroys a Bailey exemption the moment the money touches an IRA, while Michigan looks through to the source — in both directions, as the traps below note, and only for a taxpayer who kept records.

Traps

The dataset

Every figure on this page comes from a dataset of 75 facts, each carrying its statutory or administrative authority, a verbatim quote from the source, a confidence grade and an independent verification verdict. All 75 were re-checked against primary sources after drafting, and that pass corrected 11: two stale dollar figures whose replacements had already been published, three about the city layer — where a draft claimed Michigan cities categorically cannot reach a conversion until verifiers found Detroit’s own instructions taxing residents’ pre-retirement distributions — and several pin cites aimed at the wrong form inside the right book. One is worth naming for itself. A sentence widely repeated as a quotation from Magen v Department of Treasury, 299 Mich App 566 (2013), the case deciding whether rolled-over money keeps its character, appears nowhere in the opinion; a search of the official Michigan Appeals Reports bound volume found no such language. What the court said is that by moving his retirement account the taxpayer “did nothing to change [the monies’] character as ‘benefits.’” The holding survived; the quotation did not, and it is not on this page. Where an answer is genuinely open — the clawback’s reach, the one-IRA reading, the deductible-amount clause applied to a Roth, inherited-account protection, and Michigan’s treatment of a 529-to-Roth rollover, which its own program documents still describe as pending a determination — the page says so instead of picking a side.

This page is educational and is not tax or investment advice. Michigan’s 4.25% rate is re-determined annually under the MCL 206.51(1)(c) revenue trigger, the subtraction caps are indexed each year, and the bankruptcy exemption figures are re-adjusted every three years; several questions above have no controlling authority at all. Verify current figures against Michigan Treasury and the statute before acting. Figures verified as of 2026-08-09.