Michigan State Taxes: What You’ll Pay in the 2026 Tax Season

Michigan has a relatively low flat income tax of 4.25 percent, yet the state is less competitive than neighboring states such as Indiana, Ohio and Pennsylvania, which all have lower individual income tax rates, according to the Tax Foundation. The state also has the second-lowest sales tax in the Midwest, behind Wisconsin.

The big picture:

• Income tax: 4.25 percent flat tax, with a personal exemption of $5,800 for each taxpayer and dependent.
• Property tax: A statewide average of 1.15 percent of assessed value, according to the latest data available from the Tax Foundation.
• Sales tax: 6 percent statewide. Michigan does not permit local governments to impose additional sales taxes.

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How is income taxed?

Income was taxed at a flat rate of 4.25 percent in 2025. Some local jurisdictions impose an additional income tax. Links to find local rates are available here.

What about investment income?

Michigan taxes capital gains like other income at the flat 4.25 percent rate, although people born before 1946 may be eligible for a subtraction from those taxes. For 2025, the investment income subtraction is limited to $14,688 if you are single or are married filing separately. For joint filers, it’s limited to $29,376. Those limits must be reduced by any subtraction the resident receives for retirement benefits. For example, if a resident receives a $5,000 subtraction from taxes on their retirement benefit, the maximum investment subtraction they can get is $9,688 ($14,688 minus $5,000). More information is available here.

Are Social Security benefits taxed?

Michigan does not tax Social Security benefits.

How is property taxed?

Michigan has a statewide average property tax rate of 1.15 percent, according to the latest data available from the Tax Foundation. However, rates vary by county, with the lowest being 0.70 percent in Leelanau County and the highest being 1.86 percent in Ingham County. The lowest median property tax paid was $1,121 in Luce County, while the highest was $5,505 in Washtenaw County.

What about sales and other taxes?

• Sales tax: Michigan has a statewide 6 percent sales tax. It does not allow local governments to impose additional sales taxes. Sales tax exemptions include feminine hygiene products, dental prostheses, prescription drugs and groceries. Utilities, including electricity and home heating fuel, are taxed at a 4 percent rate.
• Gas and diesel: 52.4 cents per gallon.
• Vehicle tax: Vehicle sales are subject to the 6 percent sales tax.  
• Alcohol: A 6 percent sales tax applies to all retail sales of alcohol. Additionally, wholesalers pay their own taxes on beer, wine and spirits, which can be passed on to the consumer in the sale price.
• Lottery: Lottery winnings are subject to the state’s 4.25 percent flat tax.

Will my heirs or estate have to pay inheritance and estate tax?

Michigan has no inheritance tax for people who died after Sept. 30, 1993.  

Are there any tax breaks for older residents?

• Homestead property tax credit: Eligible renters and owners can receive a credit of up to $1,900 for the 2025 tax year. To be eligible, the renter or owner must be a Michigan resident for at least six months. The credit begins to phase out for claimants with total household resources above $62,500, and those with income above $71,500 are not eligible. Total household resources are defined as the total income (taxable and nontaxable) of a married couple, or of a single person maintaining a household. More information is available here.
• Retirement and pension benefits subtraction: For retirees, this is a reduction of all eligible retirement income from your Michigan taxable income. That includes defined benefit pensions, IRA distributions and most payments from defined contribution plans. The subtraction for 2025 is 75 percent for people born before 1946. For residents born between 1946 and 1952, the maximum retirement income deduction is $20,000 for a single filer or $40,000 for joint filers. However, that deduction must be reduced by any amounts claimed for taxable railroad retirement benefits or for military retirement benefits from service in the U.S. armed forces or the Michigan National Guard. More information is available here and here.