State retirement tax · Michigan
Retirement tax rules for Michigan residents (2026 guide)
Michigan's effective income-tax rate at retirement-bracket income is approximately 4.25%. Here's what it taxes, what it exempts, and how the worked numbers shake out.
Last reviewed May 3, 2026
Editorial review pending — see editorial process
Effective rate
4.25%
Taxes Social Security?
No
Approx. tax on $90k income
$2,550
Pension carve-outs
Yes
Michigan has a mid-tier effective income tax of about 4.25% on retirement-relevant income, but it joins the majority of states in fully exempting Social Security from state tax. The state-tax bite on a typical $90k-$120k retirement income lands in the $3,825–$5,100 range annually.
What Michigan taxes (and what it doesn’t)
Michigan taxes retirement income (401(k) withdrawals, IRA withdrawals, pension payments) at the state's standard income-tax rate. Social Security benefits are FULLY EXEMPT from state tax — this matters because it can change your effective state-tax burden by 2-4 percentage points compared to a state that taxes SS.
State-specific note
Flat 4.25%. Public/private pension exclusions phasing back in for 2026 (PA 4 of 2023).
A worked example
Worked example. A Michigan retiree with $60,000 of pension and IRA withdrawals plus $30,000 of annual Social Security is taxed on the $60,000 of non-SS income only (SS is exempt). At the approximate 4.25% effective rate, that's about $2,550/year — roughly $213/month — owed to the state.
Should you relocate?
Whether to relocate from Michigan for tax reasons depends on the size of your retirement income and the destination state. The math typically favors staying put unless you're at $1M+ household income or planning a 20+ year retirement that amortises the move costs.
See how Michigan state tax shapes your retirement plan
The calculator’s Taxes tab uses the 4.25% effective rate above and the SS-exemption flag automatically. Run your specific numbers and see the year-by-year tax forecast.
Run my numbers →Frequently asked
Does Michigan tax my Social Security?
No. Michigan fully exempts Social Security benefits from state income tax. You'll only owe state tax on non-SS retirement income (401(k), IRA withdrawals, pensions, brokerage gains).
What's the effective state tax rate on my retirement income?
Michigan's approximate effective rate for retirement-bracket income is 4.25%. For a $90k retirement income with $30k of Social Security, you'd owe roughly $2,550/year in state tax. Real liability varies with bracket structure, age-based exclusions, and pension carve-outs.
Should I relocate to Michigan for retirement?
It depends on the size of your retirement income, the destination state's effective rate, and your moving costs. The state-tax differential alone is rarely the decisive factor for normal-income retirees. For households with $1M+ retirement income, multi-year tax-arbitrage savings can exceed $20k/year — enough to drive the decision.
Are pension benefits taxed differently in Michigan?
Many states have specific carve-outs for pension income — particularly for public-sector pensions (teachers, firefighters, police, military). Flat 4.25%. Public/private pension exclusions phasing back in for 2026 (PA 4 of 2023). Yearfold's calculator uses an effective-rate approximation; real liability may be lower if you qualify for a pension exclusion.
Does this apply to property tax too?
No. This page covers state INCOME tax only. Property tax in Michigan is set by local jurisdictions (county / city / school district) and varies dramatically within the state. For a complete retirement-cost picture, consult your specific county's tax assessor.
Primary sources
Effective-rate and SS-taxation flags above are derived from these sources. We re-verify each annually.
Related reading
North Carolina retirement tax rules →
Comparable effective rate (4.25% vs 4.25%).
Alaska retirement tax rules →
For perspective from a different tax tier.
Utah retirement tax rules →
An example of a state that DOES tax Social Security.
Run my numbers →
The calculator's Taxes tab uses the same per-state effective rate.
How the Monte Carlo actually works →
2,000-word methodology page — covers state tax modelling.