Michigan taxes are built on four main pillars: a flat 4.25% individual income tax, a 6% sales and use tax, locally assessed property taxes, and a 6% corporate income tax. Twenty-four cities layer their own local income tax on top of the state rate. State returns are due April 15, filed with the Michigan Department of Treasury on Form MI-1040, and residents, part-year residents, and nonresidents with Michigan-source income all have filing obligations.1Michigan Legislature. Michigan Taxpayer’s Guide
Individual Income Tax
Michigan uses a flat income tax, not graduated brackets. Everyone pays the same percentage on taxable income. For the 2026 tax year, that rate is 4.25%.2Michigan Department of Treasury. State Individual Income Tax Rate for 2026 Tax Year Determined A statutory trigger can automatically lower the rate when general fund revenue outpaces inflation.3Michigan Legislature. Michigan Code 206.51 – Tax Rate on Taxable Income of Person Other Than Corporation
Each taxpayer gets a personal exemption. For 2026, it’s $5,900 per person, up from $5,800 in 2025.4Michigan Department of Treasury. Withholding Tax Information by Calendar Year Your Michigan taxable income starts with federal adjusted gross income, then gets adjusted with Michigan-specific additions and subtractions on Schedule 1 of the MI-1040.5Michigan Department of Treasury. 2025 Michigan Individual Income Tax Return MI-1040
Where you live determines what gets taxed. Residents pay on all income regardless of where they earned it. Part-year residents apportion income based on the months they lived in Michigan. Nonresidents pay only on Michigan-source income, such as wages earned while physically working in the state or income from Michigan property.
Retirement Income and Social Security
Social Security benefits are fully exempt from Michigan income tax. Military pensions and railroad retirement benefits are also completely exempt.6Michigan Department of Treasury. Pension Recipients
Other retirement and pension income qualifies for a subtraction that has phased in over recent years. For the 2026 tax year and beyond, taxpayers can subtract up to 100% of eligible retirement income, subject to annually adjusted dollar limits.7Michigan Department of Treasury. Retirement and Pension Benefits The older system that varied by birth year has effectively been replaced. Check the current dollar caps on the Department of Treasury’s retirement income page before you file, since they change each year.
Sales and Use Tax
The state sales tax is 6% on retail purchases of tangible personal property.8Michigan Legislature. Michigan Code 205.52 – Sales Tax Rate Retailers collect it at the register and remit it to the Department of Treasury. A companion 6% use tax applies to items bought outside Michigan and brought into the state, so out-of-state or online purchases don’t get a free ride. Property brought into Michigan within 90 days of purchase is presumed subject to the use tax.9Michigan Legislature. Michigan Code 205.93 – Use Tax Rate
Several categories are exempt. Prescription drugs and groceries meant for home preparation are not taxed, though prepared food for immediate consumption is. Delivery and installation charges can also be exempt when itemized separately on the invoice, a change effective April 2023.10Michigan Legislature. Michigan Public Act 2023-142
Property Taxes
Property taxes are assessed and collected locally, but the state sets the framework. Every parcel has two values that matter: a State Equalized Value (SEV) equal to 50% of estimated true cash value, and a Taxable Value used to calculate the actual bill. For most owners, they aren’t the same number.
Under Proposal A, passed in 1994, a property’s Taxable Value can rise each year only by the lesser of 5% or the inflation rate, plus the value of any new additions.11Michigan Legislature. Michigan Code 211.27a – Taxable Value Limitations When the property is sold, that cap resets. In the year after the sale, Taxable Value jumps to the full SEV, which often means a sizable tax increase for a new owner.
Principal Residence Exemption
If you own and occupy a home as your primary residence, filing an affidavit for the Principal Residence Exemption (PRE) removes up to 18 mills of local school operating taxes from your bill.12Michigan Legislature. Michigan Code 211.7cc – Principal Residence Exemption From Local School District Tax Only your primary dwelling qualifies. Second homes, rentals, and commercial buildings pay the full millage. This is one of the largest breaks available to Michigan homeowners, and missing the filing can cost hundreds or thousands a year.
Summer Tax Deferment
You can defer the summer property tax payment on a principal residence until February 15 of the following year, without penalty or interest, if your gross household income for the prior calendar year was $40,000 or less and you’re 62 or older, a veteran, or a person with a qualifying disability. Apply through your local treasurer’s office, typically by September 15.
Credits That Cut Your Bill
Homestead Property Tax Credit
This credit lets eligible taxpayers offset part of their property taxes or rent against state income tax. For the 2026 tax year, individuals with total household resources of $71,500 or less may qualify.13Michigan Department of Treasury. Michigan Taxpayers Encouraged to Check Eligibility for Homestead Property Tax Credit The credit phases out as income rises above a base threshold, shrinking by 10% for each $1,000 increment.14Michigan Legislature. Michigan Code 206.520 – Homestead Property Tax Credit
Renters qualify too. You treat 23% of your total annual rent as the equivalent of property taxes paid. Many renters miss this credit because they don’t pay property tax directly. You claim it on Schedule 1040CR filed with your MI-1040.
Earned Income Tax Credit
Michigan’s EITC is 30% of whatever federal EITC you qualify for.15Michigan Legislature. Michigan Code 206.272 – Earned Income Tax Credit If you claim the federal credit, you’re automatically eligible for the Michigan version. It’s refundable, so any amount above your tax liability comes back to you. For a working family with two children, the state credit alone can be worth well over $1,500.
City Income Taxes
Twenty-four Michigan cities impose their own income tax on top of the state rate.16Michigan Department of Treasury. Which Cities Impose an Income Tax? If you live or work in one of them, you have a separate filing obligation. Most cities cap resident rates at 1% to 1.5% and nonresident rates at half that.17Michigan Legislature. Michigan Code 141.503c – City Income Tax Rate Limits Detroit is the notable outlier with significantly higher rates.
The list includes Detroit, Grand Rapids, Lansing, Flint, Saginaw, and Pontiac, along with smaller cities like Big Rapids, Ionia, Grayling, and Hudson. The Department of Treasury administers Detroit’s tax directly; the other 23 cities handle their own collection and filing. If you work in one of these cities but live outside it, your employer should be withholding the nonresident rate. Checking your pay stub takes two minutes and can save a filing surprise later.
Business Taxes
Corporate Income Tax
Michigan imposes a 6% Corporate Income Tax on C corporations with activity in the state.18Michigan Department of Treasury. Corporate Income Tax The base starts with federal taxable income, is adjusted for items like intercompany royalties and out-of-state dividends, then apportioned to Michigan based on the corporation’s sales in the state.
Flow-Through Entity Tax
S corporations, partnerships, and LLCs taxed as partnerships can elect into Michigan’s flow-through entity tax, levied at the same 4.25% rate on business income apportioned to Michigan.19Michigan Legislature. Michigan Code 206.815 – Flow-Through Entity Tax The election works around the federal $10,000 cap on state and local tax deductions by shifting the tax to the entity level. Once made, the election is binding for three consecutive years. All elections and payments must go through Michigan Treasury Online.20Michigan Treasury Online. Michigan Treasury Online
Filing, Extensions, and Estimated Payments
Individual returns are due April 15, matching the federal deadline.1Michigan Legislature. Michigan Taxpayer’s Guide You file on Form MI-1040, reporting residency status, exemptions, and any Schedule 1 additions or subtractions.5Michigan Department of Treasury. 2025 Michigan Individual Income Tax Return MI-1040 E-filed refunds typically arrive within a few weeks; paper returns take considerably longer.
If you need more time, submit Form 4 by the original due date. A federal extension from the IRS automatically extends your Michigan deadline to match. An extension buys time to file the paperwork, not time to pay. Any tax owed is still due April 15, and extension requests submitted without required payment will be denied.21Michigan Department of Treasury. Form 4 – Application for Extension of Time to File Michigan Tax Returns If you’re expecting a refund, no extension is needed at all. Refund claims can be filed up to four years from the original due date.
Quarterly estimated payments are required if you expect to owe $500 or more after withholding and credits.22Michigan Department of Treasury. Am I Required to Make Estimated Tax Payments? This mostly hits self-employed workers, landlords, and retirees with income that isn’t withheld. Payments are due April 15, June 15, and September 15 of the tax year, with a final payment on January 15 of the following year. You can skip estimated payments if withholding will cover at least 90% of the current-year tax or 100% of the prior-year tax (110% if your AGI exceeded $150,000).
Penalties and Interest
Missing the deadline or underpaying triggers automatic penalties. The penalty starts at 5% of the tax owed for the first two months and adds another 5% for each additional month, up to a maximum of 25%.23Michigan Legislature. Michigan Code 205.24 – Penalties for Failure to File or Pay Interest runs on top of that from the original due date until you pay in full.
The State Treasurer can waive penalties if you show reasonable cause and no willful neglect. Interest is never waived. If you owe and can’t pay in full, file on time and pay what you can. The failure-to-file penalty stacks on the failure-to-pay penalty, so an unfiled return with an unpaid balance is the most expensive combination.
What Michigan Does Not Tax
Michigan does not impose a state-level estate tax or inheritance tax on deaths occurring after September 30, 1993.24Michigan Department of Treasury. Inheritance Tax Frequently Asked Questions The old inheritance tax remains on the books but applies only to estates of individuals who died on or before that date. Federal estate tax rules still apply to very large estates, but Michigan itself takes nothing from inherited assets.