Michigan retirement taxes at a glance (2026)
| State income tax | Flat 4.25%Michigan has a flat 4.25% income tax; some cities add a local income tax. |
|---|---|
| Social Security | Not taxedMichigan does not tax Social Security. |
| Pensions | Partly taxedFrom 2026 all taxpayers, regardless of birth year, can deduct retirement and pension income up to $65,987 single or $131,794 joint. Exclusion: up to $65,987. |
| 401(k) and IRA withdrawals | Partly taxedIRA and most defined contribution plan payouts count toward the same retirement deduction limit. |
| Government pensions | Partly taxedFrom 2026 public pensions share the private-pension cap, except for taxpayers born before 1946, whose public pensions stay fully exempt. Retired police, firefighters and other public safety workers can deduct their pensions without a cap. |
| Military retirement pay | Not taxedMilitary retirement pay is not taxed. |
| Estate tax | No |
| Inheritance tax | NoNone for deaths after September 30, 1993. |
| Property tax help for seniors | The homestead property tax credit was up to $1,900 for 2025; it phases out above $62,500 of household resources and ends at $71,500. |
| Sales tax | Michigan has a 6% statewide sales tax and no local sales taxes. |
Recent changes and good to know
- Public Act 4 of 2023 phased in the retirement deduction: 25% in 2023, 50% in 2024, 75% in 2025, and 100% for all birth years in 2026.
- Before 2026 the deduction depended on birth year (born 1946-1952: $20,000 single / $40,000 joint).
How to lower your retirement taxes in Michigan
- Mix your income sources. Roth IRA withdrawals are tax-free at the federal level and generally in Michigan too, so a Roth conversion before retirement can cut state tax later. Try the Roth conversion calculator.
- Watch federal Medicare costs. Large IRA withdrawals can raise your Medicare premiums. Check the 2026 IRMAA brackets.
- Think about your heirs. See what your IRA will really cost your family with the Family Tax Rate calculator.
- Comparing states? These have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Frequently asked questions
Does Michigan tax retirement income?
Mostly no for typical retirees in 2026: Michigan exempts Social Security and military pensions and lets all retirees deduct up to $65,987 ($131,794 joint) of other retirement income.
Does Michigan tax Social Security?
Michigan does not tax Social Security.
Does Michigan tax pensions?
From 2026 all taxpayers, regardless of birth year, can deduct retirement and pension income up to $65,987 single or $131,794 joint.
Does Michigan tax 401(k) and IRA withdrawals?
IRA and most defined contribution plan payouts count toward the same retirement deduction limit.
Does Michigan tax military retirement pay?
Military retirement pay is not taxed.
Does Michigan have an estate or inheritance tax?
None for deaths after September 30, 1993.
Sources (last verified 2026)
- Changes to Michigan Tax on Retirement and Pension Benefits — Municipal Employees' Retirement System of Michigan (MERS) (2026)
- Revenue Administrative Bulletin 2026-1 — Michigan Department of Treasury (2026)
- Michigan State Tax Guide — AARP (2026-03-13)
Educational content only, not tax, legal or investment advice. Plans and tax laws change; confirm details with your employer's plan documents or your state revenue department. Smart Financial Lifestyle is not affiliated with any employer named on this site.