State of Michigan tax on police pension and local government

To see why you're qualifying for the exclusion in TurboTax Online: 

1. Open TurboTax Online
2. Select  Tax Home in the left pane
3. On the  Hi, let's keep working on your taxes! screen, select the dropdown on the right side of the State Taxes box, then select Start, Continue, or Review/Edit
4. In the left pane, select Prepare State
5. Proceed through the screens until you come to the Status of your state returns screen
6. Select  Start, Continue or Edit to the right of Michigan.  
7. Proceed through the state screens until you get to the Here's the income that Michigan handles differently screen.  Select Start or Revisit to the right of Retirement Income and Pension Deduction
8. Pay attention on the Retirement Income and Pension Summary screen.  It looks like this:

You can see, under TYPE, what code might've been entered when you input your retirement income.

Then, below that, you can see a guide showing what each retirement type is, and what type of exclusion it qualifies for.

If the code for the retirement income is incorrect, select Edit next to the relevant income source and make any adjustments necessary.