Michigan Tax: Guide to Income, Sales, Property, and Retirement Taxes

Photo of the Michigan state flag blowing in the wind in front of a sunrise for a Michigan state tax article.

(Image credit: Getty Images)

Navigating the complexities of state taxes can be daunting, but understanding Michigan's tax landscape is essential for residents and newcomers alike.

In this guide, we'll explore key components of Michigan's tax system, from income and sales taxes to property taxes and retirement benefits.

Michigan state tax: Overview

In Michigan, you’ll notice that property taxes can be on the higher side, and the state’s fuel taxes are also steeper than in many others. But when it comes to income tax, Michigan keeps it pretty straightforward with a flat 4.25% rate.

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That said, some cities add their own taxes, so the rate can vary depending on where you live.

On a more positive note, Michigan’s sales tax is relatively low, which helps make everyday purchases a little less taxing.

[Data for this state tax guide was gathered from a number of sources including the U.S. Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]

Michigan income tax rate

Michigan has a flat 4.25% individual income tax rate.

Beginning in 2026 through 2028, Michigan will allow temporary deductions for tipped income and overtime pay from the income tax rate.

Michigan Retirement Taxes

Social Security: Not taxable
Pensions: Partially taxable (Military pensions are tax-exempt)
401(k) and IRA Distributions: Partially taxable
Military pensions and Railroad Retirement benefits are exempt in Michigan.

Beginning in 2026 through 2028, certain seniors can take both the standard deduction and the Social Security income deduction. This change applies to taxpayers born after 1952 and are age 67 or order.

Michigan sales tax

Still life of a small shopping cart with $1 USD bills

Michigan's sales tax rate is 6%. There are no local taxes.

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

How much is property tax in Michigan?

In Michigan, the property tax rate paid as a percentage of assessed value is 1.24% (1.15% for 2026)according to the Tax Foundation.

Michigan gas tax

rendering of a yellow car against a yellow background

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Product	Tax
Gasoline	$0.19 per gallon
Disel	$0.15 per gallon

Source: The Sales Tax Handbook

Starting in 2026, Michigan will remove gasoline and diesel from state sales tax and remove fuel from state use tax. Michigan will also raise the gas and diesel tax from $0.31 to $0.51 per gallon, and continue increased due to inflation.

Michigan taxes on alcohol and tobacco

Michigan tobacco taxes

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Product	Tax
Cigarettes	$2 per pack
Other Tobacco Products	32% of wholesale price
Medical Marijuana	6%
Recreational Marijuana	16% (6% cannabis sales tax plus 10% state excise tax)

Beginning January 1, 2026, Michigan will add a new 24% wholesale tax on cannabis.

Michigan alcohol taxes

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Product	Tax
Beer	$0.20 per gallon
Wine	$0.51 per gallon ($0.76 if above 16% alcohol by volume)
Liquor	state-controlled

Source: The Sales Tax Handbook

Michigan estate and inheritance taxes

Michigan has no estate or inheritance tax.

Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.