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Michigan Taxes: What You Need to Know

Understanding your paycheck in Michigan involves navigating federal, state, and local tax withholdings, insurance contributions, and pre-tax deductions. Here’s a comprehensive overview of all taxes applicable in 2026.

Federal, State, and Local Tax Withholding in Michigan in 2026

Federal Income Tax:

Michigan residents are subject to federal income tax, just like all other U.S. citizens. The federal tax is calculated based on a progressive tax system with varying rates depending on income brackets, meaning individuals pay higher rates on higher income only on the portion that exceeds each threshold. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently extended the Tax Cuts and Jobs Act rate structure. For the 2026 tax year, the federal tax brackets are as follows:

For Single Filers: (Source)

• 10%: Applies to taxable income up to $12,400.
• 12%: Applies to income between $12,401 and $50,400.
• 22%: Applies to income between $50,401 and $105,700.
• 24%: Applies to income between $105,701 and $201,775.
• 32%: Applies to income between $201,776 and $256,225.
• 35%: Applies to income between $256,226 and $640,600.
• 37%: The top rate applies to taxable income over $640,600.

For Married Couples Filing Jointly: (Source)

• 10%: Applies to taxable income up to $24,800.
• 12%: Applies to income between $24,801 and $100,800.
• 22%: Applies to income between $100,801 and $211,400.
• 24%: Applies to income between $211,401 and $403,550.
• 32%: Applies to income between $403,551 and $512,450.
• 35%: Applies to income between $512,451 and $768,700.
• 37%: The top rate applies to taxable income over $768,700.

For Head of Household Filers: (Source)

• 10%: Applies to taxable income up to $17,700.
• 12%: Applies to income between $17,701 and $67,450.
• 22%: Applies to income between $67,451 and $105,700.
• 24%: Applies to income between $105,701 and $201,750.
• 32%: Applies to income between $201,751 and $256,200.
• 35%: Applies to income between $256,201 and $640,600.
• 37%: The top rate applies to taxable income over $640,600.

For Married Filing Separately: (Source)

• 10%: Applies to taxable income up to $12,400.
• 12%: Applies to income between $12,401 and $50,400.
• 22%: Applies to income between $50,401 and $105,700.
• 24%: Applies to income between $105,701 and $201,775.
• 32%: Applies to income between $201,776 and $256,225.
• 35%: Applies to income between $256,226 and $384,350.
• 37%: The top rate applies to taxable income over $384,350.

The 2026 federal standard deduction increases to $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household. The standard deduction reduces the amount of income on which tax is calculated, meaning most employees won’t pay federal income tax on their first $16,100 (single) or $32,200 (joint) of earnings. (Source)

Important note for Michigan: Michigan enacted 2025 PA 24, which decouples Michigan’s income tax from certain changes to the federal Internal Revenue Code made by the OBBBA. Michigan’s individual income tax continues to use the IRC as in effect on January 1, 2024 as its starting point, meaning some federal changes — including certain OBBBA deductions — do not automatically carry through to Michigan’s state tax calculation. Generally, this causes an initial add-back to the state-level calculation beginning with tax year 2025. (Source)

Michigan State Income Tax:

Michigan uses a flat income tax rate, meaning all taxable income is taxed at the same rate regardless of how much you earn. For 2026, that rate remains 4.25%. Michigan law requires the state to review this rate annually — if general fund revenue grows faster than inflation, the rate may be reduced. For 2026, general fund revenue declined 1.56% against an inflation rate of 2.70%, so no reduction was triggered and the rate stays at 4.25%. (Source)

The withholding rate is also 4.25%, applied to compensation after deducting the personal and dependency exemption amounts. For 2026: (Source)

• Personal exemption: $5,900 per taxpayer (up from $5,800 in 2025).
• Each qualifying dependent also generates a $5,900 exemption allowance for withholding purposes.

All new employees must complete Form MI-W4 (Employee’s Michigan Withholding Exemption Certificate) before their first paycheck. Employees may claim exemption from withholding only for reasons specified on that form.

Retirement and Pension Income Deduction for 2026: Recipients born after 1945 may generally subtract qualifying retirement and pension benefits up to $67,610 if filing single or married filing separately, or $135,220 if filing a joint return. Withholding is only required on benefits exceeding these limits. (Source)

Local Income Taxes in Michigan:

Michigan does not have a statewide local income tax, but 24 Michigan cities are authorized to levy their own income taxes under the Michigan Uniform City Income Tax Ordinance. If an employee lives or works in one of these cities, both the city where they live and the city where they work may be entitled to withhold a city income tax. (Source)

Notable rates for 2026:

• Detroit: 2.4% for residents; 1.2% for nonresidents working in Detroit. The Michigan Department of Treasury administers Detroit’s income tax on the city’s behalf. (Source)
• Grand Rapids: 1.5% for residents; 0.75% for nonresidents.
• Other cities with income taxes include Flint, Lansing, Saginaw, Pontiac, and others — most follow the standard Michigan framework of residents paying twice the rate of nonresidents, with most resident rates between 1.0% and 2.4%.

Employers with employees working in any of Michigan’s taxed cities must register with that city and withhold the applicable local income tax from wages.

Sales Tax: Michigan imposes a statewide sales tax of 6% on most retail goods and taxable services. There is no local sales tax — the rate is uniform across the state. Residential electricity, natural gas, and home heating fuels are taxed at a reduced rate of 4%. Groceries purchased for home consumption are generally exempt from sales tax. (Source)

FICA and State Insurance Taxes in Michigan in 2026

FICA Taxes include Social Security and Medicare:

• Social Security is taxed at 6.2% on income up to $184,500 in 2026. This wage base increased from $168,600 in 2024 — employers must update payroll systems accordingly. (Source)
• Medicare is taxed at 1.45% on all income, with an additional 0.9% surtax on earnings over $200,000 for single filers ($250,000 for married filing jointly). (Source)

Michigan Unemployment Insurance (UI): Michigan UI is employer-funded only — employees pay nothing. The taxable wage base for 2026 is $9,000 per employee for qualifying employers (those in good standing with all quarterly reports filed and no outstanding balances of $25 or more). Delinquent employers are taxed on the first $9,500 per employee. (Source)

Key rate details for 2026: (Source)

• New employer rate: 2.7% for the first two years of liability (except construction, which pays the average construction industry rate).
• Experience-rated employers receive annual rate determinations from UIA based on their individual claims history.
• Maximum rate: 10.3% for experience-rated employers.
• Annual rate notices are issued by UIA early each year.

Michigan Paid Family and Medical Leave: Michigan does not have a state paid family and medical leave program. Unlike Massachusetts, Maryland, or Maine, Michigan employers are not required to make PFML contributions and employees do not accrue PFML benefits through a state program.

Pre-Tax Deductions in Michigan in 2026

Pre-tax deductions reduce your taxable income, thereby lowering your overall tax liability at both the federal and Michigan state level. These deductions are taken from your gross income before taxes are applied. Here’s a breakdown of common pre-tax deductions that Michigan residents can utilize:

Health Insurance Premiums

Employee contributions toward medical, dental, and vision insurance are generally deducted from wages on a pre-tax basis. This means the amounts contributed are not included in taxable income, effectively reducing the employee’s federal, state, and FICA tax liability. This can translate into significant tax savings, especially for employees with comprehensive coverage.

401(k) Contributions

Contributions to 401(k) retirement accounts are pre-tax, reducing your taxable income. For 2026, the contribution limit is $24,500, up from $23,500 in 2025. Employees aged 50 and older may contribute an additional $8,000 catch-up contribution, and a higher catch-up limit of $11,250 applies to those aged 60–63 under SECURE 2.0 provisions. The IRA contribution limit also increased to $7,500 for 2026. (Source)

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA)

• Health Savings Accounts (HSAs) are available to individuals enrolled in qualifying high-deductible health plans (HDHPs). Contributions are pre-tax and can be used for qualified medical expenses. For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. Unused funds roll over year to year. (Source)
• Flexible Spending Accounts (FSAs) allow employees to set aside pre-tax dollars for medical and dependent care expenses. The FSA contribution limit for 2026 is $3,400, up $100 from 2025. The maximum carryover amount is $680. Unlike HSAs, FSAs generally have stricter rollover rules, making it important to plan annual expenses carefully. (Source)
• Dependent Care Assistance Program (DCAP): Employees may contribute up to $5,000 per household ($2,500 if married filing separately) to cover qualifying childcare and dependent care costs on a pre-tax basis.

Tax Rates and Brackets for 2026

Key Updates for 2026

• State Income Tax Rate Confirmed at 4.25%: Following the annual review required by Michigan law, the state income tax rate remains at 4.25% for 2026. General fund revenue declined 1.56% against inflation of 2.70%, meaning the conditions for a rate reduction were not met. (Source)
• Personal Exemption Increased to $5,900: The personal exemption for withholding purposes increased from $5,800 in 2025 to $5,900 in 2026. (Source)
• Michigan Decoupled from OBBBA: Via 2025 PA 24, Michigan has decoupled its income tax from certain federal OBBBA changes. Michigan taxpayers calculate state taxable income using the IRC as of January 1, 2024, not the updated federal rules. (Source)
• UI Taxable Wage Base Remains $9,000: For qualifying employers in good standing, the taxable wage base for 2026 stays at $9,000 per employee. Delinquent employers remain at $9,500. (Source)
• Social Security Wage Base Increased to $184,500: Up from $168,600 in 2024. (Source)
• 401(k) Contribution Limit Increased to $24,500: Up from $23,500 in 2025. (Source)
• Minimum Wage Increased to $13.73/hour: Michigan’s minimum hourly wage rose from $12.48 to $13.73 effective January 1, 2026. (Source)

Median Household Income in Michigan

Michigan’s economy is anchored by the automotive industry, manufacturing, healthcare, and a growing technology sector, particularly in southeast Michigan and the Grand Rapids area. According to the U.S. Census Bureau’s 2023 American Community Survey 1-year estimates, Michigan’s median household income was $69,183, below the national median of $77,719 for the same year. (Source)

Cities like Ann Arbor, Troy, and the Oakland County suburbs of Detroit lead the state in household earnings, buoyed by technology, finance, and professional services employment. Meanwhile, older industrial cities such as Detroit, Flint, and Saginaw have median incomes well below the state average.

Michigan Tax Brackets 2026

Like Massachusetts, Michigan applies a flat income tax rate to all taxable income — meaning every Michigan resident pays the same percentage regardless of how much they earn. There are no graduated brackets at the state level. The single rate of 4.25% applies uniformly to all Michigan taxable income after subtracting exemptions. (Source)

Michigan’s income tax calculation starts with federal adjusted gross income (AGI) — with the important caveat that Michigan uses the pre-OBBBA version of the IRC (as of January 1, 2024). From federal AGI, Michigan allows certain additions and subtractions to arrive at Michigan taxable income, then applies the flat 4.25% rate.

How Michigan income tax works in practice:

1. Begin with federal AGI (based on pre-OBBBA IRC as of January 1, 2024).
2. Apply Michigan additions and subtractions (e.g., retirement income deductions).
3. Subtract the personal exemption of $5,900 per taxpayer and each qualifying dependent.
4. Multiply the remaining balance by 4.25%.

Key features of Michigan’s flat tax system:

• The same 4.25% rate applies whether you earn $30,000 or $3,000,000 in Michigan taxable income.
• The rate is subject to annual review and may change if economic conditions set out in Michigan law are met. The rate was temporarily reduced to 4.05% in 2023 — the only time a reduction has occurred since the law was enacted in 2015. Since then it has remained at 4.25%.
• Michigan’s tax calculation begins with federal AGI, which means most federal tax planning strategies that reduce AGI — such as 401(k) contributions and HSA contributions — also reduce Michigan state income tax.

Michigan cities with local income taxes:

Michigan is distinctive in that 24 of its cities are authorized to levy their own income taxes under the Uniform City Income Tax Ordinance. For employees working in or residing in these cities, a separate local withholding obligation exists on top of state withholding. Resident rates are always exactly double the nonresident rate by state law. The two most significant are:

• Detroit — the largest city income tax in Michigan: 2.4% residents / 1.2% nonresidents. The Michigan Department of Treasury administers Detroit’s income tax on the city’s behalf. (Source)
• Grand Rapids — 1.5% residents / 0.75% nonresidents.

Employees working in multiple Michigan cities may have withholding obligations to more than one city. Employers are responsible for determining which cities apply to each employee and withholding accordingly. (Source)

Other taxes in Michigan: (Source)

• State Sales Tax: 6% statewide; no local add-ons. Residential heating fuels taxed at 4%. Groceries generally exempt.
• Corporate Income Tax: 6% (applies to businesses, not individual employees).
• Property Tax: Set by local municipalities; Michigan does not levy a direct statewide property tax.