Michigan tax law rests on four main pillars: a flat 4.25% individual income tax, a 6% statewide sales tax with no local add-ons, property taxes assessed and collected locally under a constitutional cap, and a 6% corporate income tax on C-corporations. The Michigan Department of Treasury administers most of these obligations, while your city or township handles the property side. Michigan imposes no estate or inheritance tax, so inheriting assets from a Michigan decedent creates no state tax bill on its own.
Individual Income Tax
Michigan’s Income Tax Act, codified at MCL 206.1, applies a single flat rate rather than graduated brackets. For the 2026 tax year, that rate is 4.25%.1Michigan Department of Treasury. State Individual Income Tax Rate for 2026 Tax Year Determined The state has a mechanism to lower that rate automatically when revenue conditions allow, but general fund revenue declined in the most recent analysis, so no reduction took effect.
What you owe depends on residency. Full-year Michigan residents are taxed on all income no matter where it was earned. Part-year residents and nonresidents only owe tax on income sourced to Michigan, such as wages from a Michigan workplace or rent from Michigan real estate.
How Taxable Income Is Built
Your Michigan return starts with the federal adjusted gross income from your U.S. Form 1040. Schedule 1 then layers on Michigan-specific additions and subtractions. Interest on bonds issued by other states gets added back. Qualifying retirement and pension benefits, military pay, and contributions to Michigan education savings accounts come out as subtractions. The 4.25% rate applies to what remains, giving you your base liability before any credits.
Credits Worth Claiming
Two credits do real work for Michigan households. The state Earned Income Tax Credit tracks the federal version and goes to lower-income working filers. The Homestead Property Tax Credit returns part of a heavy property tax burden through the income tax return and is covered in detail below. Both are refundable, which means you can get money back even if nothing was withheld, so filing is worth it in any year you qualify.
Sales and Use Tax
Michigan charges 6% on retail sales of tangible goods under the General Sales Tax Act.2Michigan Legislature. Michigan Compiled Laws 205.51 – General Sales Tax Act The state constitution bars counties and cities from piling on their own sales taxes, so the rate is identical in Detroit, Marquette, and everywhere in between.
When an out-of-state seller does not collect Michigan sales tax, you owe the same 6% as a use tax under the Use Tax Act.3Michigan Legislature. Michigan Compiled Laws 205.91 – Use Tax Act Most large online retailers now collect automatically once they cross Michigan’s threshold of $100,000 in gross sales or 200 transactions in the prior calendar year.
Groceries bought for home consumption, prescription drugs, and certain medical devices are exempt by statute. Prepared food from restaurants is fully taxable. If a retailer charges tax on an exempt item, you have grounds to dispute it.
Property Tax
Property taxes are set and collected locally, but the framework comes from the General Property Tax Act at MCL 211.1.4Michigan Legislature. Michigan Compiled Laws 211.1 – Property Subject to Taxation Every parcel of real and personal property in the state is taxable unless an exemption applies.
Assessed Value, Taxable Value, and Mills
Two values appear on your assessment notice, and the difference matters. Assessed value is roughly half of the property’s estimated market worth. Taxable value is what your bill is actually calculated on, and under Proposal A, the 1994 constitutional amendment, it cannot rise by more than the lesser of 5% or the rate of inflation in a year you continue to own the home. When the property changes hands, the taxable value resets to the current assessed value, and the new owner often sees a sharp jump.
Local governments express rates in mills. One mill equals one dollar of tax per $1,000 of taxable value. A home with a $100,000 taxable value in a jurisdiction levying 30 mills owes $3,000 before credits. Millages fund schools, fire, libraries, and other local services and vary widely by county and township.
Homestead Property Tax Credit
If property taxes consume a large share of your income, the Homestead Property Tax Credit sends some of it back through your income tax return. To qualify, total household resources generally must be $71,500 or less, and if you own, taxable value must be $165,400 or less. Renters can claim it on the portion of rent treated as property tax equivalent. The credit phases down as income rises. You claim it by filing Form MI-1040CR with your MI-1040.5Michigan Department of Treasury. 2025 Michigan Individual Income Tax Return MI-1040
Corporate and Flow-Through Businesses
C-corporations doing business in Michigan pay a flat 6% corporate income tax on income apportioned to the state. The Corporate Income Tax Act at MCL 206.601 ties Michigan’s definitions to federal income tax terms unless state law says otherwise.6Michigan Legislature. Michigan Compiled Laws 206.601 – Meanings of Terms, Other Provisions
S-corporations, partnerships, and most LLCs do not pay the corporate tax. Profits pass through to the owners, who report them on individual returns at 4.25%. Michigan also offers an elective flow-through entity tax that lets these businesses pay state tax at the entity level, which can help owners work around the $10,000 federal cap on state and local tax deductions; the owners then claim a matching credit on their personal returns.
An out-of-state business must register and file if it has nexus with Michigan. That connection can come from physical presence, such as an office or warehouse, or from economic activity exceeding $350,000 in annual gross receipts from Michigan sources.
Estate and Inheritance
Michigan imposes no estate tax and no inheritance tax. Heirs owe the state nothing simply for receiving assets. Federal estate tax still applies above the filing threshold, which is $15,000,000 for decedents dying in 2026.7Internal Revenue Service. Estate Tax That threshold is scheduled to drop significantly after 2025 as Tax Cuts and Jobs Act provisions sunset under current federal law, so estates that cleared the line comfortably may need fresh planning. Income earned by inherited assets after the date of death, such as dividends or rent, remains subject to Michigan’s regular income tax.
Filing Your Michigan Return
Individual income tax returns are due April 15, the same day as the federal return. The main form is the MI-1040, which carries over your federal AGI, walks through Michigan additions and subtractions on Schedule 1, applies the 4.25% rate, and nets out credits and withholding.5Michigan Department of Treasury. 2025 Michigan Individual Income Tax Return MI-1040
What to Gather First
- Social Security numbers for everyone on the return.
- Your completed U.S. Form 1040, since the Michigan calculation starts from federal AGI.
- W-2s and 1099s showing Michigan income tax withheld.
- Your property tax statement or rent receipts if you are claiming the Homestead Property Tax Credit.
Schedule 1 handles additions and subtractions, including retirement benefit subtractions and the Michigan Standard Deduction available to qualifying seniors. For the homestead credit, Form MI-1040CR asks for total household resources, property taxes paid, and related detail.
Filing and Payment
E-filing through authorized tax software is the fastest route and catches common errors before submission. Business owners handle corporate filings and electronic payments through the Michigan Treasury Online portal.8Michigan Treasury Online. Michigan Treasury Online Paper returns are still accepted; the mailing address depends on whether you owe a balance or expect a refund, so check the instructions before sending. Electronic refunds typically arrive within about two weeks; paper filings take six to eight.
Extensions Are for Paperwork, Not Payment
If you cannot file by April 15, Michigan grants an automatic six-month extension to submit the return. The extension does not postpone payment. If you expect to owe, estimate and pay by the original deadline, or penalties and interest will run on the unpaid amount. Treating an extension as a license to pay later is one of the most expensive mistakes Michigan filers make.
How Long to Keep Your Records
Keep copies of your filed returns, W-2s, 1099s, and supporting documentation for at least four years from the original due date. Michigan’s statute of limitations for assessments generally runs four years, and extends if you substantially underreport income or never file. The IRS recommends at least three years, six years if you underreported more than 25% of gross income, and indefinitely if you never filed.9Internal Revenue Service. How Long Should I Keep Records Because the state and federal windows do not line up, holding everything for at least six years is the safe default.
Penalties, Interest, and Waivers
Filing late or underpaying triggers a penalty that grows with time. For most taxes the Department of Treasury administers, the late-filing or late-payment penalty starts at 5% of the unpaid balance if you are no more than two months behind, with another 5% added each additional month up to a 25% maximum. Interest runs on top from the original due date until the balance is paid.10Michigan Legislature. Michigan Compiled Laws 205.24 – Failure or Refusal to File Return or Pay Tax
Deliberate evasion is a different situation entirely. Anyone who intentionally defrauds the state or helps someone else dodge a tax faces felony charges punishable by up to five years in prison, a fine of up to $5,000, or both.11Michigan Legislature. Michigan Compiled Laws 205.27 – Prohibited Conduct, Violation, Penalties, Enforcement Michigan draws a clear line between negligence and fraud, and only fraud carries criminal exposure.
You can ask the Department of Treasury to waive a penalty if a legitimate reason explains the lapse. Serious illness, a natural disaster, or an inability to obtain records through no fault of your own typically support a waiver. Not knowing about a tax or running short on cash generally does not. The request must lay out the specific facts with supporting documentation, and even a successful waiver leaves the underlying tax and interest in place.