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.
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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.
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 2022 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 $56,961 of income from private retirement plans is exempt (up to $113,922 for joint filers). Taxpayers can also deduct up to $12,697 of interest, dividends, and capital gains (up to $25,394 for joint filers).
Taxpayers Born From 1946 to 1952: A standard deduction of $20,000 is allowed ($40,000 for joint filers). Retirees with pension benefits from employment with a government entity that was exempt from the Social Security Act have higher 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). Certain surviving spouses who are at least 67 years old can elect to take the private pension exemption described above for a single filer instead of the deduction.
Taxpayers Born After 1952: Taxpayers born from January 1, 1953, through January 1, 1956, may be eligible for a standard deduction of up to $20,000 (up to $40,000 for joint filers). Certain surviving spouses who are at least 67 years old can elect to take the private pension exemption described above for a single filer instead of the deduction. Taxpayers born after January 1, 1956, but before January 2, 1961, who have reached age 62 and receive pension benefits from employment with a government entity that was exempt from the Social Security Act may deduct up to $15,000 in qualifying retirement and pension benefits ($30,000 if both spouses on a joint return receive such benefits). Taxpayers born after January 1, 1956, with pension benefits from employment with a government entity that was exempt from the Social Security Act who were retired as of January 1, 2013, may deduct up to $35,000 in qualifying pension benefits if single or married filing separately or $55,000 if married filing jointly (if both spouses on a joint return qualify, the maximum deduction increases to $70,000). For all other taxpayers born after 1952, all retirement and pension benefits are taxable and no exemption or deduction is available.
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 $1,324 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 (46.57¢ per gallon effective January 1, 2023).
Diesel: 47.16¢ per gallon (48.56¢ per gallon effective January 1, 2023).
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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