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Michigan - State

Taxes in Michigan

From birth-year-based retirement income exemptions and Social Security relief to local income taxes and property tax programs, Michigan’s tax structure creates mixed outcomes for retirees depending on age and location.

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Jeff Smith
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Jamie Ostroe
Sr. Editor

As the Senior Editor at Retirement Living, Jamie leads the editorial team in producing high-quality, informative content that empowers seniors and their families to make informed retirement decisions. With over a decade of experience in content strategy, research, and editorial management, she is passionate about creating engaging, accessible resources tailored to the unique needs of the retirement community.

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At a glance:

  • Michigan taxes retirement income differently depending on birth year, with full or partial exemptions for many older retirees while younger retirees receive fewer or no exclusions on pension and IRA income.
  • Social Security and military pensions are fully exempt, and residents may also benefit from property tax relief programs and local homestead exemptions, though some municipalities impose additional income taxes.
  • While there is no inheritance or estate tax, overall tax treatment varies widely based on income type, age, and local jurisdiction.

Social Security and military pensions are exempt in Michigan, but other retirement income is taxed based on your birth year. Municipalities can tack on their own income tax (this includes non-residents). Below, we explain various Michigan state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.

For information regarding taxes in other states, see Retirement Taxes by State.

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Michigan Tax Rates

State Sales Tax6%
Avg State/Local Sales Tax6%
Gas Tax$0.48 per gallon
Diesel Tax$0.18 per gallon
Cigarette Tax$2.00 per pack
Income Tax4.25%
Effective Tax Rate4.25%
Property Tax1.24%
Social Security TaxNone
Medical/Dental DeductionNone
Federal Income Tax DeductionNone
Retirement TaxPartial
State Taxes in Michigan

Michigan Tax Rates Explained

Michigan Sales Tax

6%, with no local taxes. State law requires the gas tax to adjust annually. The 2025 gas tax is $0.16.

Michigan Income Tax

4.25%. Cities can also levy income taxes on residents and non-residents (who are taxed at half the rate).

Michigan Property Taxes

The effective property tax rate in Michigan is 1.24%, which is $1,921 on a $154,900 property.

Michigan’s homestead property tax credit is available to homeowners and renters. The value of the home must be $154,400 or less. The total household income must be under $67,300 (annualized for part-year residents). Those receiving 100% of household resources from the Michigan Department of Health and Human Services do not qualify. Learn more about the special situations that affect the Michigan Homestead Property Tax Credit here.

Michigan’s Principal Residence Exemption Program exempts homeowners from their local school operating millage up to 18m. Another tax relief program allows residents aged 62 or older with under $40,000 in annual income to apply for a summer property tax deferment.

Michigan Retirement Taxes

Michigan taxes benefits based on the year you were born.

Born Before 1946

Retirees in this group are fully exempt from state income tax on retirement income. 

Born between 1946 and 1958

Eligible to deduct up to 75% of the 2025 maximum retirement income exemption amount, 50% of the 2024 amount, and 25% of the 2023 amount (25%- $14,240 for single filers or $28,480 for joint filers).

Born between 1959 and 1962

Eligible to deduct up to 75% of the 2025 maximum retirement income exemption amount and 50% of the 2024 amount.

Born between 1963 and 1966

Eligible to deduct up to 75% of the 2025 maximum retirement income exemption amount. 

Born in 1967 or later

No exemption for retirement income in 2025. However, starting in 2026, retirees in this group will be eligible to deduct 100% of the maximum retirement income exemption amount. 

Military and Railroad Retirement Benefits

These benefits remain exempt from Michigan state income tax, regardless of birth year.

For a complete breakdown of retirement and pension taxes, see Michigan’s Retirement and Pension Information.

Michigan Inheritance and Estate Taxes

There is no inheritance tax or estate tax in Michigan.

For more information, visit the Michigan Department of Treasury.