LANSING, Mich. (9/28/12)--Two new state laws that become effective Oct. 1 will affect the way Michigan's credit unions handle individual retirement accounts (IRA), said the Michigan Credit Union League.
Gov. Rick Snyder decreased the income tax rate from 4.35% to 4.25% when he signed Public Act 223 of 2012 on June 26, said the league on its website. At that time, Snyder 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.
As a result of the changes, credit unions in the state will be affected when calculating the withholding tax for IRA withdrawals and distributions. In January, 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 a tax rate of 4.35% and a personal exemption option of $3,700. The reduction in the income tax rate and the increased exemption amount will benefit Michigan taxpayers and reduce their tax burden, the league said.