Two new laws will have an impact on the way credit unions handle individual retirement accounts.
Michigan residents received good news on June 26, when Gov. Rick Snyder decreased the income tax rate from 4.35% to 4.25% with the signing of Public Act 223 of 2012.
At the same time the governor also signed Public Act 224 of 2012, a bill that increases the personal and dependency exemption for personal income tax payers up to $3,950 per exemption. Both of these changes take effect on Oct. 1.
The immediate effect of these changes for Michigan credit unions will be experienced when calculating the withholding tax for individual retirement account withdrawals and distributions. In January 2012, the state mandated income tax on retirement income, which includes pension and IRA distributions.
When the new tax on retirement earnings was implemented, taxes were based on the tax rate of 4.35% and a personal exemption option of $3,700. The reduction in the income tax rate and increased exemption amount will benefit Michigan taxpayers and reduce their tax burden.