Living on a fixed income can be tough to navigate as costs continue to increase, and the situation is only made worse if you are required to pay taxes on your Social Security income. As such, a governor from Michigan has now signed a bill aimed at eliminating state taxes on all Social Security, tipped, or overtime incomes.
Here is what you need to know.
New bill eliminates taxes on Social Security, tipped, and overtime income
At the beginning of the year when the Trump Administration was elected to office, the president began working on his mega bill, the One Big Beautiful Bill Act. On July 4th the OBBBA was signed into law, and many official channels, including the White House and the Social Security Administration (SSA), touted the passage of this bill as the elimination of taxes on benefits for most. It is important to note that the OBBBA does not officially eliminate taxes on benefits. Rather, it includes a temporary additional tax deduction for seniors.
Due to this additional tax relief, a higher percentage of seniors have become exempt from paying taxes on their benefit income due to a change in thresholds. Under the OBBBA, seniors now have a $20,000 income tax exemption for single filers or $40,000 for joint filers. The OBBBA also includes new deductions for workers with tipped or overtime income. Workers can now deduct up to $25,000 of taxable income that had been earned as tips or through overtime.
As such, in a similar grain of legislature, Michigan Governor Gretchen Whitmer recently signed into law a new bill that will eliminate all taxes on Social Security, tipped, and overtime incomes at a state level. By signing this bill into law, Governor Whitmer has allowed for retirees to have better buying power from their fixed incomes. Workers who earn tips or work overtime will now be able to retain more of their earnings as well. This bill was approved alongside several other bills linked to the state budget, and according to Whitmer’s office, “the tax change will save hundreds of thousands of seniors and working families money on their taxes every year.”
“This balanced budget delivers on the kitchen table issues that make a real difference in people’s lives,” Governor Whitmer stated in an October 7th press release. “Our budget fixes the damn roads, cuts taxes for seniors and working families, funds first responders, secures core health care services that millions of Michiganders rely on, protects our air, lakes, and land, and increases government efficiency to saves taxpayers time and money. I’m so grateful to legislators on both sides of the aisle for coming together to get this done. Amidst so much uncertainty caused by a chaotic tariff strategy and a national government shutdown, Michigan is showing everyone how to get things done. In the weeks and months ahead, we will build on this momentum and come together on commonsense tools to create and retain good-paying jobs.”
What are others saying?
According to speaker of the Michigan House of Representatives Matt Hall, “Our state government spending has grown way beyond its means, and it’s time to rein it in. This budget makes a significant difference in eliminating waste, fraud and abuse to lower state spending and give the taxpayers better value for their dollars. That’s how we were finally able to get our local roads fixed and pass the public safety trust fund, all while eliminating taxes on tips, overtime and social security. You can do a lot when you take the time to evaluate state spending and set better priorities.”
“I am grateful for the collaboration and bipartisan effort to deliver a budget that is fiscally responsible and responsive to the needs of people and businesses across Michigan,” state Representative Ann Bollin (R- Brighton Township), Chair of the House Appropriations Committee stated.
“The bipartisan, forward looking, state budget that the legislature passed and the Governor has signed delivers real results for Michiganders,” said Brent Pilarski, Business Manager, Michigan Laborers District Council (LiUNA MI).