Michigan's Flat 4.25% Plus a $5,900 Exemption
Michigan taxes wages at a flat 4.25%. The rate briefly dipped to 4.05% for 2023 under a revenue trigger and then reverted, so 4.25% is the figure for 2026. Michigan does not use a standard deduction; instead it grants a personal exemption of $5,900 per person for 2026. A single filer earning $80,000 has $74,100 of Michigan taxable income after one exemption and owes about $3,149 in state tax. The state rate is straightforward, the complication in Michigan is local.
Michigan Cities Add Their Own Income Tax
Roughly two dozen Michigan cities levy a local income tax on top of the state rate. Detroit is the highest at 2.4% for residents, followed by Grand Rapids and Saginaw at 1.5% and Lansing at 1%. A Detroit resident earning $80,000 pays about $1,920 in city income tax in addition to the $3,149 owed to the state, so the local layer adds more than half again to the state bill. Where you live inside Michigan, not just that you live in Michigan, drives your total rate.
Work-City Withholding for Commuters
Like Ohio, Michigan cities tax nonresidents who work within their limits, generally at about half the resident rate, Detroit, for instance, charges nonresidents 1.2% versus 2.4% for residents. If you commute into Detroit, Grand Rapids, or another taxing city, expect a city line on your stub even though you live elsewhere. For hybrid workers, the share of days worked physically in the city can affect the withholding, so it is worth confirming how your employer sources your wages.
Michigan's Retirement Tax Is Being Rolled Back
Michigan is phasing back in a generous exemption for retirement income under a 2023 law that reverses the earlier "retirement tax." The rollback is tiered by birth year and fully phased in by the 2026 tax year, letting many retirees again deduct pension and retirement-account income that was taxable just a few years ago. If you are near retirement in Michigan, the 2026 rules are materially friendlier than the ones in place from 2012 to 2022, which changes the calculus on when to draw down accounts.
Putting the Michigan Layers Together
A full Michigan paycheck stacks the flat 4.25% state tax (after the $5,900 exemption) and, if you live or work in a taxing city, a municipal income tax of 1% to 2.4%. The state piece is simple; the city piece is where take-home pay diverges across Michigan. Select your city in the calculator above so the local rate is applied, relying on the state rate alone understates the bill for anyone in Detroit, Grand Rapids, or one of the other two dozen taxing cities.
Michigan's EITC Just Jumped to 30%
Michigan quintupled its Earned Income Tax Credit. The 2023 law (Public Act 4) raised the state match from 6% to 30% of the federal EITC and made the increase retroactive to the 2022 tax year, so qualifying Michigan workers saw a much larger refundable credit. It is claimed on the MI-1040 and pays out even when no Michigan tax is owed. For a lower-income family the jump from 6% to 30% is real money, often several hundred to over a thousand dollars, and it is one of the more generous state EITCs in the Midwest now.
The Retirement-Tax Rollback, by Birth Year
Michigan's pension tax has whipsawed. A 2011 law taxed retirement income on a three-tier birth-year system (taxpayers born before 1946 kept a generous deduction; 1946 to 1952 got a partial one; 1953 and later were largely taxed). The 2023 "Lowering MI Costs" law reverses that, phasing back in the more generous pre-2012 treatment over four years and reaching full effect for the 2026 tax year. As it fully phases in, many retirees can again deduct a large share of pension and retirement-account income, with the exact amount depending on your birth-year tier and a choice between the new phased deduction and the older age-based one. Social Security remains exempt throughout.
Setting Withholding and Filing: MI-W4 and MI-1040
You set Michigan withholding on Form MI-W4, where each personal and dependent exemption ($5,900 for 2026) reduces the wages subject to the flat 4.25%. Residents file Form MI-1040 by April 15, e-filed through Michigan Treasury Online. The wrinkle, as always in Michigan, is local: if you live or work in a taxing city you may owe a separate city return on top of the MI-1040 (Detroit's city return is administered through the state system, while many other cities collect their own). Confirm both the state and any city obligation rather than assuming the MI-1040 covers everything.
A Michigan Paycheck, State Plus City
Take a salary near the Michigan median household income, about $69,000. State tax is a flat 4.25% on income after the $5,900 exemption, roughly $2,680. If you live in a city without a local tax, that is the whole state-and-local bite. A Detroit resident, however, adds the city's 2.4% on top, about $1,656 more, while a Detroit non-resident who commutes in pays 1.2%. So two Michiganders earning $69,000 can differ by well over a thousand dollars a year depending purely on which city taxes them. Use the city selector in the calculator above to apply the right local rate.
Social Security and Medicare (FICA) are federal, so they come out the same in Michigan as in every other state. The main Paycheck Calculator walks through the full federal side, including the Social Security wage base and the Additional Medicare surtax.