Rep. Julie Alexander’s plan helping protect the finances of surviving spouses after the death of a loved one is advancing in the Michigan House.

Alexander’s measure – unanimously approved today by the House Tax Policy Committee — will clarify Michigan law and eliminate pension tax penalties when an older spouse dies and leaves behind a younger spouse.

“Pension income that is not taxable should not suddenly become taxable solely because of the death of a spouse,” said Alexander, of Hanover. “We must clarify Michigan law to protect surviving spouses from unfair and unexpected tax penalties when a loved one passes away. It’s simply the right thing to do for seniors, many of whom are on fixed incomes and can’t afford sudden and unexpected higher taxes.”

The clarification is needed because Michigan taxes retirement income differently depending on the year a taxpayer was born. The income tax benefits are best for those born before 1946, and taxation rates are fully phased in for those born after 1952.

Because of these varying taxation levels, couples with spouses in different age tiers often choose to file joint tax returns using the age of the older spouse. Alexander’s plan will allow a surviving younger spouse to continue filing under the deceased older spouse’s age as long as the surviving spouse does not remarry.

The measure will have significant benefits for residents like Sue Macrellis of Jackson, whose husband Michael died in 2014.

“I cannot begin to share the emotional and physical trauma of this loss,” Macrellis said recently during committee testimony on House Bill 4171. “As a new widow, I not only had to adjust to the emptiness of my home, my life, my bed – but also, as most widows must, I needed to adjust to a reduced income.”

Then came time to file state income taxes for 2015. The couple’s pension income previously had not been taxed because Michael Macrellis was born before 1946. But the state began taxing the exact same pension income after his death because Sue Macrellis was born after 1946 – costing her hundreds of dollars a year.

“I could not comprehend why – when this money had never been taxed before – I now had to pay taxes on this same income,” she told lawmakers. “House Bill 4171 would remedy this injustice going forward. There are many surviving spouses who are impacted by this unjust quirk of the 2011 income tax changes. I ask you to rectify this situation and grant relief to the surviving spouses who already have suffered devastating personal loss.”

House Bill 4171 advances to the House Ways and Means Committee for further consideration.

PHOTO INFORMATION: Rep. Julie Alexander (left) and Jackson County resident Sue Macrellis testify on Alexander’s House Bill 4171 in the House Tax Policy Committee.

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