TaxtirementState guides · MI
How Michigan taxes retirement income
- Michigan doesn't tax Social Security benefits.
- Exclusions and subtractions for retirement income (details below):
- Retirement and pension benefits subtraction — fully phased-in method, MCL 206.30.
- Tier 1 — born before 1946.
- Public safety retiree subtraction, MCL 206.30.
- Tier 2/3 standard deduction alternative, MCL 206.30: from age 67.
- Rates for 2026: 4.25% flat rate.
At a glance
| Income tax | Yes |
|---|---|
| Rates (2026) | 4.25% flat rate |
| Starts from | Federal adjusted gross income (AGI) |
| Personal exemption | $5,900 per person |
| Social Security | Not taxed |
| Retirement income exclusions | 4 (see below) |
| Roth conversions | Taxable |
| Capital gains | Taxed like other income |
| Local income tax | Yes, in some places (see below) |
Social Security
Michigan doesn't tax Social Security benefits.
Pensions, IRAs and 401(k)s
Retirement and pension benefits subtraction — fully phased-in method, MCL 206.30(10) (Form 4884)
For 2026 and later, regardless of birth year: subtract combined public + private qualifying retirement benefits included in AGI up to $67,610 (single or MFS) or $135,220 (joint) PER RETURN. The cap is reduced by amounts subtracted for military retirement, Michigan National Guard retirement and railroad retirement. Public pensions (federal, Michigan, MI local) count against the same cap (except for taxpayers born before 1946 and public-safety retirees, below). IRA distributions qualify only if a 'qualified' distribution (generally age 59.5+, death or disability); employer pensions qualify on retirement. Deferred-comp (non-qualified) plans generally don't qualify. Cap indexed to CPI annually.
Tier 1 — born before 1946 (MCL 206.30(9)(a))
Public retirement benefits (federal, Michigan and MI political subdivisions, military) fully exempt without limit; private benefits (incl. IRAs) up to $67,610 single / $135,220 joint less the public-benefit subtraction. Plus a separate interest/dividend/capital-gains subtraction (Schedule 1 line 28): 2025 cap $14,688 single / $29,376 joint, reduced by retirement/military/railroad subtractions taken. Uses older spouse's birth year on a joint return; unremarried surviving spouse can use deceased spouse's birth year.
Public safety retiree subtraction, MCL 206.30(11)
Retirees of Michigan public police/fire departments, state police troopers/sergeants, county corrections officers (and certain federal law-enforcement FERS) may subtract ALL public retirement income without limit; private benefits allowed up to the remaining balance of $67,610/$135,220.
Tier 2/3 standard deduction alternative, MCL 206.30(9) (elective)
Elective instead of the (10) method; taxpayer picks whichever gives lower taxable income. Born 1946-1952: $20,000 single / $40,000 joint retirement subtraction before 67, and at 67 a standard deduction of $20,000/$40,000 against all income (reduced by railroad/military subtractions). Born after 1952 and age 67+ (turns 67 the day before the 67th birthday; older spouse on joint): $20,000/$40,000 standard deduction against all income, reduced by the personal exemption(s) and railroad/military subtractions; for tax years 2026-2028 only (2025 PA 24) it is NOT reduced by the Social Security subtraction, so SS can be subtracted in full on top. 'Uncovered' (non-Social-Security) public retirees have larger $35,000/$55,000/$70,000 amounts. Mostly valuable to retirees with little pension/IRA income.
Roth conversions
A Roth conversion counts as taxable income for Michigan. Whether a retirement income exclusion can cover part of it depends on the rules above.
Capital gains
Taxed like other income, at the rates above. Only seniors born before 1946 get the interest/dividend/capital-gains subtraction (2025: $14,688 single / $29,376 joint, reduced by retirement subtractions).
Credits and relief for older residents
- Homestead Property Tax Credit (MI-1040CR). Refundable credit based on property taxes/rent vs. total household resources (which include Social Security and other nontaxable income, and Roth rollovers per Treasury FAQ). Seniors 65+ receive a larger percentage of the credit. Amounts not researched here.
- Home Heating Credit (MI-1040CR-7). Low-income refundable credit; not researched.
Local income taxes
24 Michigan cities levy their own income tax (e.g., Detroit 2.4% resident / 1.2% nonresident; most others 1% resident / 0.5% nonresident). City ordinances generally exempt Social Security and pension/retirement distributions but tax interest, dividends and capital gains of residents. Not modeled in this file.
More detail from our research notes
Flat 4.25% for 2026 (confirmed by the 2026 withholding guide). Personal exemption $5,900 per taxpayer, spouse and dependent for 2026 (indexed). Additional special exemption for deaf/blind/disabled not age-related. Social Security (the taxable portion included in AGI) and Tier 1/Tier 2 railroad retirement are subtracted in full. Taxpayers may choose among the three calculation methods each year (tier method under (9), phase-in method under (10) which is fully phased in at 100% for 2026, or public-safety method under (11)) and use whichever yields the lowest tax; Michigan forms automate this via the 'residual standard deduction' shortcut. For joint returns, the birth year/age of the OLDER spouse controls. Roth conversions: Treasury FAQ — conversions included in AGI are taxable, but the rollover distribution qualifies for the pension subtraction (within the cap) if the owner is at least 59.5 when it occurs. Roth IRA distributions excluded from AGI are not taxed. Pre-2026 phase-in history: 2023 25% (born 1946-1958), 2024 50% (born 1946-1962), 2025 75% ($49,423/$98,846, born 1946-1966).
Pending confirmation
These points were still being confirmed against Michigan's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.
3 items
- 2026 interest/dividend/capital-gains subtraction cap for those born before 1946 (2025: $14,688/$29,376): Treasury's FAQ (re-checked 2026-10-02) still shows only 2025. Expected on the 2026 MI-1040 Schedule 1 instructions (Dec 2026-Jan 2027, https://www.michigan.gov/taxes/iit-forms).
- Exact definition of 'qualified' IRA distribution for the (10) method (age 59.5 vs other exceptions) taken from Treasury Roth FAQ and long-standing Form 4884 practice; confirm on 2026 Form 4884 instructions.
- Homestead property tax credit amounts for 2026 (max credit, $62,500/$71,500 resource limits are 2025 indexed values) not yet published; expected in the 2026 MI-1040CR booklet (Jan 2027).
Sources
Every figure comes from these documents, mostly the state's own forms, instructions and statutes.
- 2026 withholding guide: rate 4.25%, personal exemption $5,900, 2026 retirement subtraction caps $67,610/$135,220, born-before-1946 and public-safety ruleshttps://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/SUW/TY2026/446_Withholding-Guide_2026.pdf
- RAB 2026-1: treatment of retirement income under PA 4 of 2023 and PA 24 of 2025 (tiers, elective methods, 2026 full phase-in, SS/standard deduction change 2026-2028, IRA rollovers); RAB 2026-1 (Jan. 8, 2026) Issue 3 and Example E: the private retirement maximum is applied per return to the combined public and private benefits of both spouseshttps://www.michigan.gov/taxes/rep-legal/rab/2026-revenue-administrative-bulletins/revenue-administrative-bulletin-2026-1
- Retirement and pension benefits overview (phase-in table; IRA distributions qualify)https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits
- Roth conversion FAQ: taxable, but qualifies for pension subtraction if 59.5+https://www.michigan.gov/taxes/questions/iit/accordion/roth/are-conversions-from-a-regular-ira-to-a-roth-ira-subject-to-michigan-individual-income-tax-1
- 2025 Schedule 1 instructions: interest/dividend/capital-gains deduction for those born before 1946 ($14,688/$29,376), Tier 3 standard deduction worksheet, SS subtractionhttps://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/Schedule-1-Instr.pdf
- Homestead Property Tax Credit (MI-1040CR): line 34 3.2% of total household resources, Table A senior percentages, Table B phase-out, $1,900 maximum, $71,500 limit (2025 MI-1040 booklet pp. 2, 26, 32-33)https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf
- Treasury news, April 15, 2026: no MCL 206.51(1)(c) rate cut for TY2026 (FY2025 GF revenue -1.56% vs inflation 2.70%); rate 4.25%https://www.michigan.gov/treasury/news/2026/04/15/state-individual-income-tax-rate-for-2026-tax-year-determined
Taxtirement's Michigan calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.
See your own years. Taxtirement applies these Michigan rules, and the federal and Medicare rules, to your household for every year of retirement, and shows the calculation behind each number. Coming November 2026 for iPhone, iPad and Mac.
This page summarizes Michigan's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.