Does Michigan tax retirement income?

Does Michigan tax Social Security?

Michigan does not tax Social Security benefits.

Taxable Social Security is fully subtracted. For 2026–2028, filers born after 1952 who are 67+ and use the Michigan standard deduction no longer have to reduce it by the Social Security subtraction (Public Act 24 of 2025).

Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.

Are pensions taxed in Michigan?

For 2026, up to $67,610 of pension and IRA income is subtracted ($135,220 joint), whatever your birth year.

The Public Act 4 of 2023 phase-in is complete for 2026: the retirement and pension subtraction applies regardless of birth year, up to $67,610 for single or married filing separately and $135,220 for joint filers, covering public and private benefits combined. (In 2025, people born 1946–1966 could take 75%: $49,422 / $98,845.) You may instead choose the birth-year tier method, the police/fire/corrections method or the Michigan standard deduction ($20,000 single / $40,000 joint for those born after 1946 who have reached 67).

Public vs. private pensions: Public and private pensions share one combined cap.

Are IRA and 401(k) withdrawals taxed in Michigan?

IRA withdrawals and most defined-contribution payouts count toward the same 2026 cap; amounts above it are taxed at 4.25%.

Deferred compensation generally does not qualify.

Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.

Is military retirement pay taxed in Michigan?

Military retirement pay is fully exempt and does not count against the pension cap.

What is Michigan’s income tax rate?

A flat 4.25%.

A flat 4.25% for 2026 (no formula cut was triggered). Some cities, such as Detroit, add a local income tax.

Standard deduction and exemptions

No general standard deduction. Personal exemption: $5,900 for 2026 ($5,800 for 2025). People born after 1946 who have reached 67 can take the Michigan standard deduction ($20,000 / $40,000) instead of the retirement subtraction.

What tax breaks do seniors get in Michigan?

The full retirement subtraction, the Michigan standard deduction at 67+, the Social Security subtraction and, for 2026–2028, the ability to combine Social Security with the standard deduction. The homestead property tax credit maximum was $1,900 for 2025.

What changed for 2026?

2026 is the first year the retirement subtraction applies to everyone regardless of birth year. The cap is indexed; the 2027 amount is not yet announced. The Social Security/standard-deduction stacking applies for 2026–2028 only.

The 2026 rate, exemption and retirement cap are official.