Michigan does not tax Social Security benefits. The state’s flat 4.25% income tax leaves Social Security entirely alone, regardless of how much you receive or how you file. The federal government is the one that may still want a cut, and whether you owe anything to the IRS depends on your total income from all sources.
Michigan’s State Exemption
Michigan law lets you subtract all Social Security benefits from your adjusted gross income when figuring your state taxable income. The deduction sits in MCL 206.30(1)(f)(iii) and covers Social Security as defined by the federal tax code, including retirement, survivor, and disability payments.1Michigan Legislature. MCL – Section 206.30 – Income Tax Act of 1967 (Excerpt) Supplemental Security Income is not part of federal adjusted gross income to begin with, so it never shows up on your Michigan return either.
The exemption has no income ceiling and no phase-out. Someone collecting $40,000 a year in benefits gets the same complete deduction as someone collecting $15,000. Michigan is one of 42 states, plus Washington, D.C., that take nothing from Social Security at the state level.
Worth knowing if you have other retirement income: Michigan also fully exempts military retirement pay and railroad retirement benefits, with no dollar cap on either.1Michigan Legislature. MCL – Section 206.30 – Income Tax Act of 1967 (Excerpt)2State of Michigan. RAB 2016-13 Railroad Employee Benefits Starting with the 2026 tax year, Michigan also allows every taxpayer to deduct combined public and private pension income up to an inflation-adjusted cap, regardless of birth year.3State of Michigan. Revenue Administrative Bulletin 2026-1 The pension cap does not reduce your Social Security deduction; the two run separately.
What the IRS May Still Take
Michigan’s generosity stops at the state line. The IRS taxes Social Security on a sliding scale tied to what it calls combined income: your adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits.4Internal Revenue Service. Social Security Income
For single filers, heads of household, and qualifying surviving spouses:
- Combined income below $25,000: none of your benefits are federally taxable.
- Combined income between $25,000 and $34,000: up to 50% of benefits may be taxable.
- Combined income above $34,000: up to 85% of benefits may be taxable.
For married couples filing jointly:
- Combined income below $32,000: none of your benefits are federally taxable.
- Combined income between $32,000 and $44,000: up to 50% of benefits may be taxable.
- Combined income above $44,000: up to 85% of benefits may be taxable.
Married couples who file separately and lived together at any point during the year get the harshest treatment. Up to 85% of benefits become taxable no matter how low their income.5Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable This surprises some couples and is worth factoring in before choosing that status.
These thresholds were set in 1983 and 1993 and have never been adjusted for inflation. More retirees cross them every year. A combined income of $34,000 is now within reach of anyone with modest pension or investment income on top of Social Security.
One important point: “up to 85%” refers to how much of your benefit becomes subject to tax, not the tax rate itself. The taxable portion is then taxed at your ordinary federal income tax rate.
Paying the Federal Tax You Owe
Social Security does not withhold federal tax from your benefit payments automatically. If you expect to owe, you have two ways to handle it.
The simpler path is voluntary withholding. File IRS Form W-4V with the Social Security Administration and choose one of four flat rates: 7%, 10%, 12%, or 22%. No other percentages or dollar figures are allowed.6Internal Revenue Service. Form W-4V (Rev. January 2026) – Voluntary Withholding Request The 7% rate often fits retirees whose combined income just crosses into taxable territory. Higher rates make sense if you have significant other income.
The alternative is quarterly estimated tax payments on Form 1040-ES. You generally need to make them if you expect to owe $1,000 or more after withholding and credits. The IRS waives underpayment penalties if you paid at least 90% of the current year’s tax or 100% of the prior year’s tax, whichever is smaller.7Internal Revenue Service. Estimated Taxes A separate waiver exists for taxpayers who retired after age 62 or became disabled during the year, provided the underpayment had reasonable cause.
Every January, Social Security mails Form SSA-1099 showing the prior year’s total benefits. Report that total on line 6a of Form 1040 and the taxable portion on line 6b. IRS Publication 915 has worksheets for calculating the taxable amount, and most tax software does it for you.8Internal Revenue Service. Publication 915, Social Security and Equivalent Railroad Retirement Benefits
If You Claim Early and Keep Working
Taxes aren’t the only reason your Social Security payment can shrink. If you claim before full retirement age and keep earning a paycheck, the earnings test reduces what Social Security actually sends you. It is a benefit withholding, not a tax, but it changes the number that lands in your account.
For 2026:
- Under full retirement age for the entire year: Social Security withholds $1 in benefits for every $2 you earn above $24,480.9Social Security Administration. Receiving Benefits While Working
- Reaching full retirement age during the year: Social Security withholds $1 for every $3 you earn above $65,160, counting only earnings in months before you reach that age.10Social Security Administration. Exempt Amounts Under the Earnings Test
- At or past full retirement age: no reduction, no matter how much you earn.
The withheld amount is not gone for good. Once you hit full retirement age, Social Security recalculates your monthly payment to credit you for the months benefits were reduced. The short-term cash flow effect is still real if you were counting on those checks.
The Bottom Line for Michigan Retirees
At the state level, Michigan takes nothing from your Social Security benefits. You still have to think about the federal side, where combined income determines whether up to half or up to 85% of your benefits are added to your taxable income. Setting up voluntary withholding through Form W-4V or making estimated payments keeps you from facing a surprise bill at tax time, and watching your combined income around the $25,000, $32,000, $34,000, and $44,000 thresholds is where most of the planning payoff lives.