Michigan Tax Calculator 2026

Michigan Income Tax

Michigan imposes a flat 4.05% state income tax for the 2026 tax year. Michigan has maintained a flat-rate income tax structure for decades, which simplifies calculations compared to states with graduated brackets. The rate was 4.25% for many years, but a revenue trigger mechanism caused a temporary increase followed by a scheduled reduction. Michigan’s flat tax applies uniformly to all taxable income regardless of the amount, making it one of the more predictable state income tax systems in the country.

Michigan allows a personal exemption of approximately $5,400 per filer and dependent. The state does not offer a standard deduction in the traditional sense; instead, taxable income starts with federal AGI and is adjusted by Michigan-specific additions and subtractions. Common subtractions include military pay, certain retirement income (depending on birth year), and contributions to Michigan 529 education savings plans. Michigan does not allow itemized deductions at the state level—the personal exemption is the primary tax reduction available to all filers.

Michigan’s treatment of retirement income is notably complex due to 2011 reforms that created a tiered system based on the taxpayer’s birth year. Those born before 1946 can exempt all public pension income and up to $56,961 (single) or $113,922 (joint) of private pension and retirement income. Those born between 1946 and 1952 can exempt up to $20,000 (single) or $40,000 (joint) of retirement income after reaching age 67. Those born after 1952 receive only the standard personal exemption against retirement income, with no additional retirement-specific deductions. Social Security benefits remain exempt for all age groups.

Michigan Sales Tax

Michigan has a flat 6% state sales tax with no local option taxes. The rate is uniform throughout the state, making Michigan one of the easiest states for sales tax compliance. Michigan’s constitution dedicates the majority of sales tax revenue to education, specifically the School Aid Fund, which provides per-pupil funding to K-12 schools. This constitutional dedication was established by Proposal A in 1994, which fundamentally restructured Michigan’s school funding model by shifting reliance from local property taxes to the state sales tax.

Groceries (food for home consumption) and prescription medications are exempt from Michigan sales tax. Clothing is fully taxable. Michigan imposes a separate 6% use tax on items purchased outside the state for use in Michigan, including online purchases. The state has adopted economic nexus rules requiring remote sellers with $100,000 or more in Michigan sales to collect and remit sales tax. Michigan does not tax most services, which keeps the overall sales tax burden relatively moderate.

Michigan Property Tax

Michigan’s average effective property tax rate is approximately 1.32%, which is above the national average. Property taxes in Michigan fund local governments, school districts, libraries, and special authorities. Property is assessed at 50% of its true cash value, known as the State Equalized Value (SEV). However, the taxable value (the amount actually used to calculate your tax bill) is subject to the Proposal A cap, which limits annual increases to the lesser of 5% or the rate of inflation, until the property is sold.

When a property is sold, its taxable value “uncaps” and resets to the current SEV, which can result in a significant property tax increase for new homeowners purchasing a property that has been owned for many years. This uncapping mechanism means that long-term homeowners often pay significantly less in property taxes than recent purchasers of comparable homes. Michigan offers a Principal Residence Exemption (PRE) that exempts the owner-occupied home from the 18-mill school operating tax, which typically reduces property taxes by 25-35% compared to non-homestead properties.

Michigan City Income Taxes

One of Michigan’s most distinctive tax features is the authorization of city-level income taxes. Twenty-four Michigan cities currently levy their own income tax, with Detroit having the highest rate. Detroit charges residents 2.4% and nonresidents who work in the city 1.2%. These rates are set by state statute for Detroit as a special case; all other cities are limited to 1% for residents and 0.5% for nonresidents (or 2% and 1% for cities that have obtained special authorization).

Grand Rapids levies a 1.5% resident rate and 0.75% nonresident rate. Other cities with income taxes include Lansing, Flint, Saginaw, Battle Creek, Pontiac, Port Huron, and several others. For someone living and working in Detroit earning $75,000, the combined state (4.05%) and city (2.4%) income tax equals 6.45% of income, or approximately $4,838. This combined burden is significant and is one reason Detroit and other Michigan cities with income taxes face challenges attracting and retaining residents compared to suburban communities that do not levy city income taxes.

City income taxes in Michigan apply to all earned income (wages, salaries, business profits) but do not typically apply to retirement income or Social Security benefits. Nonresident workers pay the nonresident rate based on income earned within the city limits. Michigan city income tax returns must be filed separately from the state return, adding administrative complexity. The city income tax revenue is an important funding source for these municipalities, particularly Detroit, where it constitutes a major portion of the city’s General Fund budget.

Michigan vs. Neighboring States

• Michigan vs. Ohio: Ohio exempts the first $26,050 of income from tax and has rates up to 3.5% above that, generally resulting in lower state income tax. However, Ohio has widespread city income taxes (most cities charge 1-2.5%), making the comparison location-dependent. Ohio property taxes (1.36%) are similar to Michigan (1.32%).
• Michigan vs. Indiana: Indiana’s flat 3.05% state rate is lower than Michigan’s 4.05%. Indiana also has county income taxes averaging about 1.5%, which is comparable to Michigan’s city taxes (where applicable). Indiana’s property taxes are generally lower than Michigan’s.
• Michigan vs. Wisconsin: Wisconsin has graduated rates from 3.5% to 7.65%, meaning lower-income earners pay less but higher earners pay more than Michigan’s flat 4.05%. Wisconsin’s 5% sales tax is lower, and property taxes (1.51%) are higher. Wisconsin has no local income taxes.
• Michigan vs. Illinois: Illinois has a flat 4.95% state income tax, higher than Michigan’s 4.05%. Illinois property taxes are significantly higher (especially in the Chicago suburbs). Illinois has no local income taxes outside Chicago area. Both states have 6% base sales tax rates.