How Michigan taxes retirement income
Michigan does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Social Security is fully exempt from Michigan income tax (not counted toward the pension subtraction cap). Under the Public Act 4 of 2023 phase-in, tax year 2026 is the first year the birth-year restriction is removed: ALL taxpayers, regardless of age, may subtract up to 100% of eligible retirement/pension income (pensions, 401k, IRA distributions), capped at $67,610 (single/MFS) or $135,220 (joint) for 2026, indexed annually for inflation. Taxpayers may instead elect the birth-year tier structure (most generous for those born before 1946, who get an uncapped/unlimited subtraction) or the qualified public-safety-retiree subtraction if more favorable. Roth IRA distributions are separately exempt.
Retirement income tax in Michigan, at a glance
| Income type | Taxed by Michigan? |
|---|---|
| Social Security | No |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | No |
| Estate / inheritance tax | None |
| Avg. property tax rate | 1.18% of home value |
Does Michigan tax Social Security benefits?
No. Michigan does not tax Social Security benefits.
Does Michigan tax pensions and 401(k) or IRA withdrawals?
Partly. Social Security is fully exempt from Michigan income tax (not counted toward the pension subtraction cap). Under the Public Act 4 of 2023 phase-in, tax year 2026 is the first year the birth-year restriction is removed: ALL taxpayers, regardless of age, may subtract up to 100% of eligible retirement/pension income (pensions, 401k, IRA distributions), capped at $67,610 (single/MFS) or $135,220 (joint) for 2026, indexed annually for inflation. Taxpayers may instead elect the birth-year tier structure (most generous for those born before 1946, who get an uncapped/unlimited subtraction) or the qualified public-safety-retiree subtraction if more favorable. Roth IRA distributions are separately exempt.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Michigan taxation of retirement income (Social Security, pensions, 401(k)/IRA): Michigan Department of Revenue / Taxation.