Taxes in Michigan
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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 Tax||6%|
|Avg State/Local Sales Tax||6%|
|Gas Tax||$0.27 per gallon|
|Diesel Tax||$0.27 per gallon|
|Cigarette Tax||$2.00 per pack|
|Effective Tax Rate:||4.25%|
|Social Security Tax||None|
|Federal Income Tax Deduction:||None|
Michigan State Taxes Explained
Michigan Sales Tax
6%, with no local taxes. State law requires the gas tax to adjust annually. The 2023 gas tax is $0.286.
Michigan Income Taxes
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 1.54%, which is $2,381 on a $154,900 property.
Michigan’s homestead property tax credit is available to homeowners and renters. The value of the home must be $135,000 or less. Total household income must be under $60,000 (annualized for part-year residents). Those receiving 100% of total 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. 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.
Before 1946: No tax on federal and state retirement plans. Government pensions from other states are exempt if they do not tax Michigan pensions. Up to $54,404 of private retirement plan income is exempt ($108,808 for joint filers). Taxpayers can also deduct up to $12,127 ($24,524 for joint returns) of interest.
Between 1946 and 1952: Up to $20,000 of retirement plan income is exempt (up to $40,000 for joint filers). When taxpayers turn 67 years old, this exemption is replaced with a $20,000 or $40,000 standard deduction. However, the standard deduction is reduced by deductions taken for military or railroad retirement benefits. Taxpayers who retire with pension benefits from a government entity exempt from the Social Security Act have higher exemption and deduction limits.
After 1952: No exemption for retirement income. A pension from a government entity that was exempt from the Social Security Act may be deductible. Taxpayers have two options when they turn 67 years old: either deduct $20,000 from all income sources ($40,000 for joint filers) or claim personal exemptions and deduct Social Security, military and railroad retirement income.
For a complete breakdown of retirement and pension taxes, see Michigan’s Retirement and Pension Information.
Michigan Estate and Inheritance Taxes
There is no inheritance tax or estate tax in Michigan.
For more information, visit the Michigan Department of Treasury.