Tax in Michigan: a complete guide

1 min readLast updated March 4, 2024by Rachel Carey

This Michigan tax guide gets you up to speed with the current landscape, including the several recent changes made to tax rules and regulations in the state.

Summary

  • Michigan has a flat state income tax rate.

  • Those in Michigan can also claim a personal exemption, which can reduce their tax burden.

  • Michigan is home to some of the highest property tax rates in the country.

  • financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.  

What is income tax rate in Michigan?

Michigan is one of the states that has set a flat income tax rate, meaning you pay the same level however much you earn.  

Need help with your taxes?

A financial advisor can help you with all of your tax planning needs.

Michigan state income tax is currently 4.25%, one of the lowest among states that set a flat rate. However, it’s worth noting that 24 Michigan cities, including Detroit, charge an additional rate ranging from one to 2.4%. , which can increase this figure.

Here’s a table that shows you the local and total income tax rates for a selection of Michigan cities. The list below gives a good idea of how urban income tax can stack up.

CityState rateCity rateTotal rate
Albion 4.25% 1% 5.25%
Big Rapids 4.25% 1% 5.25%
Detroit 4.25% 2.4% 6.65%
Highland Park 4.25% 2% 6.25%
Jackson 4.25% 1% 5.25%
Lapeer 4.25% 1% 5.25%
Pontiac 4.25% 1% 5.25%
Portland 4.25% 1% 5.25%
Saginaw 4.25% 1.5% 5.75%
Walker 4.25% 1% 5.25%

Since 2022, taxpayers have been able to claim the state personal exemption, which is $5,000, or $10,000 for joint filers. This exemption reduces the overall amount of tax Michigan residents have to pay.

If you want help developing tax strategies to keep more of your hard-earned income, a financial advisor can help. They will work with you to create a tax plan and help you reduce your tax burden.

Find a financial advisor with Unbiased. Answer a few questions, and we’ll match you with an advisor perfectly suited to meet your needs. Get started here.

What is the sales tax in Michigan?

The sales tax position in Michigan is straightforward.

Unlike many other states, there are no city or county sales taxes to worry about. This means you pay a flat statewide rate of 6% – a lower rate than other states in the region.

You’ll find that restaurant food is subject to this tax, but other foods, such as your daily groceries, are not taxed. 

Other useful exemptions include prescription medicines and newspapers. Energy such as electricity, natural gas and home heating fuels are taxed at the lower rate of 4%. 

There are different rates for different types of alcohol in Michigan, with the liquor rate being noticeably high: 

  • Michigan Beer Tax is $0.20 per gallon 

  • Michigan wine tax is $0.51 per gallon 

  • Liquor tax is $11.90 per gallon 

How much is property tax in Michigan? 

If you want to set up home in Michigan, it’s important to know that the state has some of the highest property tax rates in the country.

On average, residents pay 1.32% of their home’s value in property taxes each year. 

There are some variables, too.

As property taxes are valued and collected locally, the amount you’ll pay will vary significantly between areas. For example, the rate is 0.87% in Leelanau County, while in Wayne County, which includes the city of Detroit, it’s dramatically higher at 2.35%. 

According to the August 2023 Norada Housing Market Forecast, the average home value in Michigan is currently $235,361, which means values have gone up by 2.3% over the last 12 months. A shortage of available housing stock could well prevent any significant falls from happening in the near future. It’s a resilient market with strong demand.  

 

How much is motor tax in Michigan?

The sales tax on your vehicle purchase in Michigan is 6%, just like other sales taxes.

In terms of dollars, you must multiply the full asking price by 0.06. So, for example, if you paid $10,000 for a car, the motor sales tax would be $600. This is true whether you buy from a dealer or a private individual.

Remember that you’ll also have to pay other fees such as registration, title and license plates. 

Michigan’s gasoline motor fuel tax is $0.19 per gallon and $0.15 per diesel. 

What is the estate tax in Michigan?

If you’re considering Michigan as a retirement location, you’ll be interested to learn that the state collects no estate or inheritance tax. 

Just six American states require residents to pay any state inheritance tax as of 2023, and only 12 states currently impose estate taxes.

Michigan is in neither of these groups. 

What is the retirement tax in Michigan?

If you're planning to retire in Michigan, there's more good news on the taxation front for you.

Michigan doesn’t tax Social Security payments and provides some healthy deductions on most other types of retirement income.

So, what do we mean by healthy deductions on retirement income? Here are some examples: 

  • Taxpayers born before 1946 are eligible for deductions against a private pension income of $54,404 per person.

  • These taxpayers can subtract interest dividends and capital gains of up to $12,127 per person.

  • Public pension income is exempt from tax.

  • Taxpayers born between 1946 and 1952 can claim a $20,000 deduction against all income.

  • For government pension income, the figure is $35,000 per person.

Get expert financial advice

For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert.

A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.    

Find your financial advisor with Unbiased.

Frequently asked questions

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.

Need help with your taxes?

A financial advisor can help you with all of your tax planning needs.