state tax

Michigan State Tax Guide

State tax rates and rules for income, sales, property, fuel, cigarette, and other taxes that impact Michigan residents.

Bottom Line

Middle-Class Families: Least Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Not Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)

The Great Lakes State tends to collect more state and local taxes from residents than most other states, thanks in large part to above-average property taxes. The state's median property tax rate is the 14th-highest in the nation. Fuel taxes are high as well.

Michigan has a flat state income tax of 4.25%, but municipalities tack on their own taxes. The result is a middle-of-the-road income tax burden for most residents.

On the positive side, sales taxes in Michigan are below average. The state rate is 6%, which isn't too bad. Plus, there are no additional local sales taxes to worry about. But all-in-all, Michigan is often not a good place for residents when it comes to state and local taxes.

Michigan Income Taxes

Michigan Income Tax Range

Michigan has a flat tax rate of 4.25%. Cities can levy income taxes as well, on both residents and non-residents (who are taxed 1/2 the rate of residents).

Michigan Taxation of Social Security Benefits

Social Security benefits are not taxed by the state. Although taxpayers born after 1952 can claim a $20,000 deduction ($40,000 for joint filers) in lieu of the Social Security exemption and other tax breaks.

Michigan Tax Breaks for Other Retirement Income

Military pensions and Railroad Retirement benefits are exempt for all taxpayers.

Michigan's treatment of other retirement income, which depends on when the recipient was born, is as follows (all dollar figures are for the 2021 tax year).

Taxpayers Born Before 1946: Income from federal and Michigan government retirement plans is exempt. Government pensions from other states are also exempt if the other state does not tax Michigan government pensions. In addition, up to $54,404 of income from private retirement plans is exempt (up to $108,808 for joint filers). Taxpayers can also deduct up to $12,127 of interest, dividends, and capital gains (up to $24,254 for joint filers).

Taxpayers Born From 1946 to 1952: Up to $20,000 of retirement income is exempt (up to $40,000 for joint filers). Once these taxpayers turn 67 years old, the retirement income exemption is replaced with a $20,000 standard deduction against all income ($40,000 for joint filers). The standard deduction is reduced by any deductions taken for military or railroad retirement benefits. Retirees with pension benefits from employment with a government entity that was exempt from the Social Security Act have higher exemption and deduction limits ($35,000 for single filers, $55,000 for joint filers, or $70,000 for joint filers if both spouses worked for an "uncovered" agency).

Taxpayers Born After 1952: Retirement income is generally not exempt (although pension income from employment with a government entity that was exempt from the Social Security Act may be deductible up to the limits described above). However, once these taxpayers turn 67 years old, they can either (1) claim personal exemptions and deduct Social Security, military, and railroad retirement income, or (2) deduct $20,000 from all income sources ($40,000 for joint filers).

Michigan Sales Tax

6% state levy. No local taxes.

  • Groceries: Exempt, but prepared food is taxable
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Michigan Real Property Taxes

In Michigan, the median property tax rate is $1,501 per $100,000 of assessed home value.

Michigan Property Tax Breaks for Retirees

Michigan offers tax credits to both homeowners and renters who meet restrictions on income (and property value, if applicable). These credits are more generous to those 65 or over. Property owners 62 or over with total gross household income of $40,000 or less may be able to defer payment on property taxes as well.

Michigan Motor Fuel Taxes

Gasoline: 45.17¢ per gallon.
Diesel: 47.16¢ per gallon.

Michigan Sin Taxes

Cigarettes: $2 per pack
Premium cigars (more than $1.56/piece wholesale): $0.50 per cigar
Other tobacco products: 32% of wholesale price

Beer: $0.20 per gallon
Wine: $0.51 per gallon ($0.76 if above 16% alcohol by volume)
Liquor: 12% of retail price (4% general fund tax, 4% state school aid tax, and 4% convention facility development tax)

Marijuana: 10% excise tax, plus state sales tax

Michigan Estate and Inheritance Taxes

No estate or inheritance tax.

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