LANSING — Michigan taxpayers could see thousands of dollars in savings over the next three years, owing to new policies included in the state budget.
“We have some new tax relief for tipped wages, overtime pay, more favorable treatment of retirement income for Social Security earners,” said Bob Schneider, an analyst with Citizens Research Council.
The policies could impact hundreds of thousands of Michigan workers and tens of thousands of seniors.
The tip exemption can apply to up to $25,000 in tips, which would save a taxpayer more than a thousand dollars if they reach that limit.
Workers can also exempt close to $13,000 in overtime earnings from the state’s 4.25% income tax.
“So if someone’s making $20 an hour right now, and when they get into the overtime hours, they’re making time and a half,” said Rep. Parker Fairbairn, (R) District 107, Harbor Springs. “So they’d be making extra $10 — $30 an hour, that $10 would not be getting taxed anymore.”
Gov. Whitmer’s office says that the overtime exemption will save close to 500,000 workers an average of $500 annually.
Whitmer also says that the tip exemption will give around 300,000 workers an average of $400 in state tax relief.
Those state cuts combine with federal tax breaks to provide even greater savings for many earners.
“What that functionally means is about $400 in the pocket of Michiganders when they file their taxes with those tax exemptions — and when coupled with the federal tax policy on these issues, it could be about $1,500 a year to an individual,” said Sen. Kevin Hertel, (D) District 12, St. Clair Shores.
Around 40,000 seniors will also see their Social Security benefits exempted from state taxes.
The relief only applies to retirees with other earnings — those receiving only Social Security already have those benefits excluded from their taxes.
Lawmakers say these policies are part of several changes that ease the burden on Michigan taxpayers.
“All of that tax relief — whether it’s the Working Families Tax Credit, the repeal the retirement tax now this exemption on tips, overtime and Social Security — all build up to help people across the state of Michigan who are struggling with higher costs,” Hertel said.
The new policies will be in effect through 2028 unless lawmakers later decide to extend them.