Home State Tax Michigan State Tax

Michigan State Tax

Michigan State Tax

Michigan State Tax: A Comprehensive Guide

When it comes to paying taxes, the Michigan Department of Treasury is responsible for collecting and enforcing tax laws in the state of Michigan. Understanding this complex area of law can be challenging, but we are here to help you break it down in easily digestible sections. This article will give you an overview of Michigan State tax, including what it is, how it is assessed, the different types of taxes that are levied, and the available tax credits.

What is Michigan State Tax?

Michigan State tax is a set of taxes levied on individuals and businesses by the state of Michigan. Taxes are collected by the Department of Treasury and are used to fund state programs and services. Michigan State tax is unique in that it is based on both a person’s federal adjusted gross income and Michigan taxable income.

Michigan taxable income is actually the tax base on which the Michigan State Income Tax is calculated. It is calculated by taking the federal adjusted gross income and adding back any deductions that were taken on the federal return that are not allowed under Michigan law.

How is Michigan State Tax assessed?

Michigan state tax is calculated based on federal taxable income and Michigan taxable income. The state of Michigan has a flat income tax rate of 4.25% assessed on all income earned in the state. Taxpayers are required to file Michigan income tax returns if they have income from Michigan sources or if they are full-year residents of Michigan. Michigan residents who have income earned in states with reciprocal agreements may be able to avoid paying taxes on that income in Michigan.

The Different Types of Taxes Levied in Michigan

Michigan State income tax is just one form of tax levied in Michigan. There are several different taxes that are levied in the state of Michigan, including:

Sales Tax: Michigan has a state sales tax rate of 6%, which is applied to most retail transactions in the state.

Excise Tax: Excise taxes are levied on specific goods or services, such as gasoline, cigarettes, and alcohol.

Use Tax: Use tax is a tax on items purchased for use in Michigan, but not subject to Michigan sales tax.

Property Tax: Property taxes in Michigan are assessed on real property, such as land and buildings. The tax is collected at the local level, and rates can vary depending on the location of the property.

Corporate Income Tax: Michigan also has a corporate income tax, which is a tax on the profits of corporations operating in the state.

Available Tax Credits in Michigan

The state of Michigan offers several tax credits to help reduce the burden of state taxes on individuals and businesses. Some of the most common tax credits include:

Homestead Property Tax Credit: This credit is available to Michigan residents who own or rent a primary residence in the state. The credit is based on the property tax paid on the primary residence.

Earned Income Tax Credit: This credit is available to low-income workers who meet certain eligibility requirements.

College Tuition and Fee Credit: This credit is available to Michigan taxpayers who pay college tuition or fees for themselves or a dependent. The amount of the credit is based on the actual expenses paid.

Small Business Tax Credit: This credit is available to small businesses with fewer than 100 employees. The credit is based on the amount of state taxes paid by the business during the tax year.

Tips for Reducing Your Michigan State Tax Liability

Here are some tips for reducing your Michigan State Tax liability:

Take Advantage of Tax Credits: As mentioned above, Michigan offers several tax credits that can help reduce your overall tax liability.

Keep Accurate Records: Keeping accurate records of all income and expenses can help ensure that you are claiming all available deductions and credits.

Contribute to Retirement Accounts: Contributing to a retirement account, such as an IRA or 401(k), can help reduce your overall taxable income.

Donate to Charity: Donating to a qualified charity can help reduce your taxable income.

Final Thoughts

Tax laws in the state of Michigan can be complex and confusing, but understanding them is important for ensuring that you are meeting your tax obligations. By following the tips outlined in this article, you can reduce your Michigan State Tax liability and stay in compliance with state tax laws. It is important to stay informed about any updates or changes to the Michigan State tax system, and to consult with a tax professional if you have any questions or concerns.


Michigan is a flat taxation state and some cities will impose additional taxes.  Income taxes are to be reduced every year by .1% until 2015, when the tax rate will become 3.9%.  This is down from a flat tax rate of 4.35%.  Tax returns are due on April 15.

Michigan state sales tax – 6%, (food, prescription drugs exempt, home heating fuel taxed at 4%)

Michigan state excise taxes

Taxes assessed on vehicles, alcohol, tobacco, gasoline and are in addition to federal excise taxes.

– $2.00 per package of 20 cigarettes

– $.48 tax per liter of mixed spirits

– 12% on premise consumption of liquor, 13.85% for off premises consumption

– $6.30 per 31 gallon barrel of beer

– $.135 per liter of wine, $.20 for alcohol over 16%.

– $.19 a gallon on gasoline, $.12 if gasoline contains ethanol

– $.15 a gallon on diesel, $12 if biodiesel

Michigan inheritance tax

There are no longer taxes on inheritance and estates in Michigan.  Only federal laws are in effect.

Michigan payroll taxes

State Disability Insurance – none
State Unemployment Insurance – .06% to 11.05%, wage base is $9,000.  Employer contribution is 2.70% but if the employer is a construction firm that rate is 7.9%
State minimum wage is $7.40

Michigan state property tax

Property tax is local and depends on the city or county in Michigan.  The country assessor will determine the value of the property, usually 50% of its cash value.  Property taxes can be delayed by the disabled, veterans, spouses of veterans and farmers.  The homestead program, known as the Homeowner’s Principal Residence Exemption Program will exempt the homeowner from taxes, such as local school taxes.  There are additional credits for those households making under $82,650

Exemptions

There are personal exemptions from taxation that total $3,600 for individuals and $7,200 for couples.  Dependents are subject to a $2,300 exemption and seniors can claim a $2,300 exemption.

Private pension income exclusion stands at $45,120 or $90,240 for married couples.  Those over 65 may also receive exemptions from taxation on income from interest, dividends and capital gains, up to $10,058 for individuals or $20,115 for married joint filers.  Many public pensions are completely exempt from state taxation.

Military retirement pay is not taxed.  This includes benefits passed to the surviving spouse.  Military disability and veteran’s pensions are almost always exempt from federal and Michigan state taxation.

Corporate income tax

The newest form of Michigan corporate taxes go into effect on Jan 1, 2012, exempt sole proprietorships, and pass through entities from taxation.  Corporations making under $350,000 in gross profits, sourced in Michigan, are exempt from taxation.  All other corporations will be subject to a 6% tax rate on federal taxable income.  Insurance companies pay 1.25% of gross direct premiums and financial institutions pay .20% of net capital to Michigan.  Businesses must separate Michigan sales from other sales for the purposes of taxation.