Michigan Tax Guide 2026

Constitutional uniformity

Michigan Constitution Art. IX §7 requires that any income tax be at a uniform rate. Like PA and IL, this constitutionally locks the flat structure. The 4.25% rate has held since 2012. The 2023 budget triggered a temporary one-year drop to 4.05% under a statutory revenue-trigger formula, but the rate reverted to 4.25% in 2024 — verify the current year's rate against the Michigan Department of Treasury.

Personal exemption (no standard deduction)

Michigan does NOT offer a standard deduction. Instead, a personal exemption of ~$5,800 per filer + dependent (2026 estimate; indexed). MFJ with two dependents: 4 × ~$5,800 = ~$23,200 exempt. No itemized deductions for state purposes either. Retirement income partially exempt under the recently-restored retirement income deduction (2023+, phased in through 2026 — covering pensions and 401(k) distributions for taxpayers born in certain windows; the 'pension tax' reform is ongoing).

Corporate Income Tax

Mich. Comp. Laws §206.623 imposes 6% CIT on C-corporations with $350,000+ in apportioned gross receipts. S-corps, partnerships, and most LLCs are NOT subject to CIT (they're pass-throughs). The Single Business Tax and the Michigan Business Tax that preceded the current CIT are repealed.

Flow-Through Entity Tax (Michigan's PTET)

Mich. Comp. Laws §206.813 (effective 2021+) lets S-corps and partnerships elect a 4.25% entity-level tax — Michigan's federal SALT-cap workaround. Members/shareholders receive a refundable personal income tax credit. Election by 15th day of 3rd month after tax-year close. For Michigan-resident owners in pass-throughs subject to the $10k SALT cap, this is a clean federal benefit with no Michigan downside.

City income tax — 24 jurisdictions

Twenty-four Michigan cities levy local income tax under the Uniform City Income Tax Act (Mich. Comp. Laws §141.501 et seq.). Standardised rate structure: • **Detroit**: 2.4% resident / 1.2% non-resident • **Grand Rapids, Saginaw, Highland Park**: 1.5% resident / 0.75% non-resident • **Most others** (Lansing, Flint, Pontiac, Battle Creek, Lapeer, Albion, Big Rapids, Hamtramck, Hudson, Ionia, Jackson, Muskegon, Muskegon Heights, Port Huron, Portland, Springfield, Walker, Benton Harbor): 1% resident / 0.5% non-resident Residents are taxed on all income (including out-of-city earned). Non-residents are taxed only on income earned in the city. Resident credit for city tax paid to another Michigan city is generally available (varies by ordinance). Employers in covered cities withhold at the non-resident rate for non-resident employees and the resident rate for resident employees. Self-employed file directly.

Sales tax — refreshingly simple

Statewide 6%. No local sales tax. No county add-on. No city add-on. A retailer in Detroit collects the same 6% as a retailer in Mackinac Island. This is one of the simplest sales-tax compliance environments in the country. Constitution Art. IX §8 caps state sales tax at 6%. Economic nexus: $100,000 or 200 transactions (Wayfair). Grocery food is exempt. Most clothing is taxable.

Property tax

Statewide average effective ~1.32%. Funded by school millage, county, township, and special districts. Headlee Amendment (1978) and Proposal A (1994) cap annual assessment increases on the same owner at 5% or inflation, whichever is less — with reset to market value on sale. The 'pop-up tax' on home purchases is a known feature of Michigan property tax. Homestead Property Tax Credit (state-level) provides refundable credit for low-income filers whose property tax exceeds 3.2% of household income.

Self-employed considerations

Sole proprietors file federal Schedule C → Michigan MI-1040 → city income tax return for any covered Michigan city where work was performed or residence held. LLC annual report: $25 (one of US's lowest). Michigan uses the common-law test for worker classification (not ABC test). Detroit specifically has a Detroit Income Tax Voluntary Disclosure program for self-employed who realise they should have been filing for years.

Worked example: Marcus Johnson, freelance audio engineer (Detroit resident working in suburbs, single, 2026)

Marcus's 2026 SE income: $98,000 — clients located in Detroit ($35k), Grand Rapids ($28k), and surrounding non-tax-city locations ($35k). He lives in Detroit.

Federal: SE tax ~$13.8k, income tax ~$10k (skipped). Michigan state: Personal exemption: 5,800 MI TI: 98,000 − 5,800 = 92,200 (no half-SE deduction adjustment; verify state-specific treatment) MI flat tax: 4.25% × 92,200 = $3,919 Detroit (resident — taxed on ALL income): 2.4% × 98,000 = $2,352 Credit for taxes paid to other MI cities (varies by ordinance — Detroit allows credit up to its own rate on the other-city-sourced income) Grand Rapids non-resident tax on $28k: 0.75% × 28,000 = $210 Detroit credit: limited to 2.4% × 28,000 = $672, but only $210 was actually paid → credit = $210 Detroit net: 2,352 − 210 = $2,142 Grand Rapids non-resident return: $210 Total Michigan state+local: 3,919 + 2,142 + 210 = $6,271 on $98k → ~6.4% effective state+local. Moving from Detroit to a non-tax-city Michigan suburb (Ferndale, Royal Oak — no city income tax) would save ~$2,000/year just on the Detroit resident tax.

Statute references

• Constitutional uniformity (flat-rate requirement) — Mich. Const. Art. IX §7
• Personal income tax — Mich. Comp. Laws §206.51
• Flow-Through Entity Tax election — Mich. Comp. Laws §206.813
• Uniform City Income Tax Act — Mich. Comp. Laws §§141.501–141.787
• Sales tax cap (constitutional 6%) — Mich. Const. Art. IX §8
• Property tax assessment cap (Proposal A) — Mich. Const. Art. IX §3

Related pages

• State Tax Comparison →
• PTET Analyzer →
• Multi-State Tax Guide →