Retiring in Michigan: What the State Actually Takes

On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — Michigan takes $0 a year in state income tax.

That is the number people compare, and it is the smallest of three. Property tax adds about $3,569 on the state's $299,900 median home, and insurance another $2,415. The three together come to $5,984, placing Michigan 9th of 50.

A note before you start. This is general education, not tax advice. Every Michigan figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2026. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.

1. What Michigan takes from retirement income

On Social Security. Fully exempt with no cap, no age test, and no tier test. MCL 206.30(1)(f)(iii) deducts Social Security benefits as defined in IRC section 86; because Michigan begins from federal AGI, only the federally-taxable portion is ever added in and that portion is then fully subtracted. Michigan taxes $0 of Social Security. One historical interaction is now suspended: a filer electing the Michigan standard deduction under MCL 206.30(9) previously had to give up or net against the Social Security subtraction, and Public Act 24 of 2025 lifts that for tax years 2026 through 2028 — see the record notes.

On 401(k) and IRA distributions. The four-year phase-in under public Act 4 of 2023 is complete in 2026, and the birth-year gate is gone. Revenue Administrative Bulletin 2026-1, Issue 2: 'Tax year 2026 and each year thereafter — regardless of year of birth, taxpayers may deduct combined public and private retirement benefits up to the inflation-adjusted private retirement maximum.' 2026 caps are $67,610 single or married-separate and $135,220 joint, up 2.6% from 2025's $65,897 / $131,794. No age trigger for 2026, which is the headline change — the phrase 'regardless of year of birth' removes it. The cap is shared, not per-stream: a filer born in 1946 or later must combine all deductible public retirement income (federal, Michigan, or another state's with a reciprocal deduction) with any private retirement income and apply the single limit to the combined total (MCL 206.30(10)(d)). Distributions that never qualify regardless of age: 457 deferred compensation, 401(k) amounts attributable to employee contributions alone, 403(b) other than annuities purchased by a 501(c)(3) or public school system, premature distributions before retirement eligibility, and early-retirement incentive payments not from a pension trust. On a joint return the older spouse's age governs any birth-year test.

2. The rule that decides your Michigan bill

Military pensions are fully exempt and uncapped, under MCL 206.30(1)(e)(i), which deducts 'Compensation, including retirement or pension benefits, received for services in the Armed Forces of the United States.' The subdivision matters structurally and is commonly miscited: subdivision (e) is not subject to the subsection (9), (10) and (11) limits that govern subdivision (f), which is precisely why military retirement escapes the tier caps. Railroad retirement (206.30(1)(e)(ii)) and Michigan National Guard retirement (206.30(1)(e)(iii)) are likewise fully exempt. Public and private pensions are not identical, and this is the most misreported point about Michigan in 2026. For filers born before 1946 (Tier 1), federal and Michigan public pensions remain unlimited, while private pensions are capped. For anyone born in 1946 or later, public and private are treated the same and share one combined cap of $67,610 / $135,220 — so 2026 is not a full return to pre-2012 treatment for them. Treasury's own answer to 'is this a return to pre-2012 treatment' is 'Yes, with one exception,' and that exception is exactly this. A separate and better carve-out exists under MCL 206.30(11) for retired Michigan public police and fire employees, state police troopers and sergeants, county jail corrections officers, and federal employees in substantially similar work: their public retirement benefits are fully unlimited and were never subject to the phase-in, with private benefits then capped at the r

Public Act 24 of 2025 changes the 2026 math and is missing from most summaries. For tax years 2026 through 2028 only, a filer born after 1952 who has reached age 67 may subtract both their Social Security income and a full Michigan standard deduction — the prior requirement to reduce the standard deduction by the Social Security subtraction is lifted. The standard deduction must still be reduced by the personal exemption and by any military, National Guard, or railroad retirement subtraction, and MCL 206.30(9)(e) bars taking the personal exemption at all when the $20,000/$40,000 deduction is claimed. Treasury's own worked example shows a single 71-year-old with $35,000 AGI going from $12,200 of Michigan taxable income in 2025 to $3,000 in 2026 on identical income, purely from this change.

Michigan does have a standard deduction, contrary to the common summary — just not a general one. There is no deduction against ordinary income for filers under 67, which is why standardDeduction is recorded as zero here. But MCL 206.30(9) provides a Michigan Standard Deduction of $20,000 single / $40,000 joint against all income once the older spouse reaches 67 (for those born after 1945), with enhanced amounts of $35,000 / $55,000 / $70,000 for retirees from government agencies not covered by Social Security. It is elective — a filer takes whichever of the standard deduction or the retirement subtraction produces lower taxable income — and this site's calculator models only the retirement-subtraction branch.

3. What Michigan charges at three income levels

The same state, three retirements. All figures are for a single filer aged 70.

Read down the middle column. The exemption that makes a modest retirement free here is worth nothing to an affluent one — the bill goes from $0 to $2,826 as income rises. That is a phase-out, and it is the single most misreported feature of state retirement taxation.

A married couple with $48,000 of Social Security and $62,000 of distributions pays $0.

4. Property tax, and why it lands harder in retirement

An effective rate of 1.2% on the state's $299,900 median home is about $3,569 a year.

For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.

It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.

Michigan does have a homestead provision, and it is the one lever on this line worth understanding.

Michigan's Principal Residence Exemption (PRE) exempts a qualifying primary residence from the local school district's operating millage — typically up to 18 mills ($18 per $1,000 of taxable value) — while county, city/township, and other non-school-operating millages still apply. On a home with $200,000 in taxable value, this saves roughly $3,600/year versus a non-homestead (e.g. second home or rental) property taxed at the full local rate. Not automatic — owners must file a PRE affidavit (Form 2368) with their local assessor, generally due by June 1 (for the current summer/winter tax bill) or November 1 (for a partial exemption on the winter bill only), and the property must be the owner's principal residence as of that date.

Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.

5. Insurance, the line nobody prices

Average home insurance in Michigan: $2,415 a year — 23rd cheapest of the fifty states.

This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.

For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.

6. What retiring in Michigan actually costs

Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. Michigan is shown against its own neighbours in the ranking, and against the extremes.

Michigan comes to $5,984, 9th of 50.

Income tax is 0% of that total, which is the whole point: the number everybody checks contributes nothing to the number that matters.

One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.

7. The exemption shrinks as your income rises

Michigan's exemption is not a flat one. It shrinks as income rises, from $0 on a modest retirement income to $2,826 on an affluent one. The four-year phase-in under public Act 4 of 2023 is complete in 2026, and the birth-year gate is gone. Revenue Administrative Bulletin 2026-1, Issue 2: 'Tax year 2026 and each year thereafter — regardless of year of birth, taxpayers may deduct combined public and private retirement benefits up to the inflation-adjusted private retirement maximum.' 2026 caps are $67,610 single or married-separate and $135,220 joint, up 2.6% from 2025's $65,897 / $131,794. No age trigger for 2026, which is the headline change — the phrase 'regardless of year of birth' removes it. The cap is shared, not per-stream: a filer born in 1946 or later must combine all deductible public retirement income (federal, Michigan, or another state's with a reciprocal deduction) with any private retirement income and apply the single limit to the combined total (MCL 206.30(10)(d)). Distributions that never qualify regardless of age: 457 deferred compensation, 401(k) amounts attributable to employee contributions alone, 403(b) other than annuities purchased by a 501(c)(3) or public school system, premature distributions before retirement eligibility, and early-retirement incentive payments not from a pension trust. On a joint return the older spouse's age governs any birth-year test. A phase-out is a marginal rate in disguise. Inside the phase-out band an extra dollar of income costs the ordinary rate plus the exemption it withdraws — so the real cost of a larger withdrawal is higher than the headline schedule suggests.

8. What a Roth conversion costs in Michigan

Converting $50,000 to a Roth costs an extra $1,593 in Michigan tax — 3.2 cents on the dollar.

These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.

The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 3.2%. The federal tax is due either way.

9. What part-time work costs here

$20,000 of part-time work costs an extra $599 in Michigan tax — an effective 3% on the earnings.

Compare that with the 3.2% a Roth conversion costs. Earned income is the cheaper dollar here, which is unusual.

Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.

10. The order to draw your accounts in

The order you draw accounts in is worth real money, and the right order depends on the state.

Michigan applies the same treatment whenever you withdraw, so the order is a federal question rather than a state one — with the exception that the marginal rate is 0%, and a year of unusually high withdrawals pays that on the excess.

Smoothing withdrawals across years therefore beats lumping them, modestly. Take a large one-off distribution in a single year and it climbs the bracket schedule; spread the same amount over three and more of it stays low.

Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.

11. Or move across the state line

For most people the real alternative to Michigan is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.

Michigan is the cheapest of the group on these three lines, at $5,984. Crossing any of these borders costs money.

One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.

12. If you are moving to Michigan from somewhere else

The eight most populous states people leave, measured against Michigan on the same three lines.

Michigan is cheaper than 8 of these eight. That is the case for the move, on these lines.

A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.

Michigan charges a transfer tax on the purchase itself — 0.9%, customarily paid by the seller. On the state's $299,900 median home that is about $2,579, once, at the point of sale. Closing costs here run about 2% to 5% of the price — $5,998 to $14,995 on the median home, which is the real entry fee for the annual saving this article has been describing.

13. Where these Michigan figures are approximate

Every income tax figure above comes from this site's own Michigan record, and that record notes its own limits. They are reproduced here rather than left in the dataset, because a reader who falls into one of these cases is being quoted a number that is wrong for them.

• The cap is also reduced by any subtraction taken for military compensation and pensions, railroad retirement, or Michigan National Guard retirement (rab 2026-1, Issue 4) — this site's calculator does not model that reduction.
• For an age-67-plus Michigan filer the standard-deduction branch may produce a materially lower bill, so a Michigan result here can overstate the tax for that group.

None of this affects the property tax or insurance lines, which come from a separate dataset and are not modelled.

If you are in one of the cases above, treat the income tax figure as the shape rather than the amount and get the number from a preparer who can see your actual return.

14. What Michigan does not exempt you from

The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.

Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.

IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. What Michigan adds on top is a separate question from what the federal system takes.

15. Establishing that you actually live here

Any state tax advantage is worth nothing until Michigan is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.

The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.

16. Who Michigan actually suits

Someone on a modest retirement income. Michigan charges $0 at the modest profile — the exemption does its work at the bottom of the range.

It suits an affluent retiree least. At the affluent profile the bill is $2,826, and whatever exclusion helps a modest income has stopped helping by then.

17. What to check before you decide

Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.

Get a real insurance quote on a real address. $2,415 is the state average; construction, roof age and exposure move it a long way.

Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in Michigan the mix between Social Security and distributions changes the answer.

And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.

Frequently asked questions

Does Michigan tax Social Security? No. Fully exempt with no cap, no age test, and no tier test. MCL 206.30(1)(f)(iii) deducts Social Security benefits as defined in IRC section 86; because Michigan begins from federal AGI, only the federally-taxable portion is ever added in and that portion is then fully subtracted. Michigan taxes $0 of Social Security. One historical interaction is now suspended: a filer electing the Michigan standard deduction under MCL 206.30(9) previously had to give up or net against the Social Security subtraction, and Public Act 24 of 2025 lifts that for tax years 2026 through 2028 — see the record notes.

Does Michigan tax 401(k) or IRA withdrawals? The four-year phase-in under public Act 4 of 2023 is complete in 2026, and the birth-year gate is gone. Revenue Administrative Bulletin 2026-1, Issue 2: 'Tax year 2026 and each year thereafter — regardless of year of birth, taxpayers may deduct combined public and private retirement benefits up to the inflation-adjusted private retirement maximum.' 2026 caps are $67,610 single or married-separate and $135,220 joint, up 2.6% from 2025's $65,897 / $131,794. No age trigger for 2026, which is the headline change — the phrase 'regardless of year of birth' removes it. The cap is shared, not per-stream: a filer born in 1946 or later must combine all deductible public retirement income (federal, Michigan, or another state's with a reciprocal deduction) with any private retirement income and apply the single limit to the combined total (MCL 206.30(10)(d)).

What about pensions — private, government, or military? A $50,000 pension costs $0 if private, $0 if a government pension, and $0 if military retired pay.

What does retiring in Michigan actually cost? Income tax of $0 on the typical profile, plus about $3,569 of property tax and $2,415 of insurance on the median home — $5,984, which is 9th of 50.

Is Michigan a cheap state to retire in? On these three lines it ranks 9th of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.

Does the exemption phase out? Yes. It is worth most at a modest income — $0 — and nothing by the affluent profile, where the bill is $2,826.

What does a Roth conversion cost in Michigan? An extra $1,593 in state tax on $50,000 converted, and $3,718 on $100,000. That is 3.2% of the amount converted, on top of the federal tax.

Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $599 in state tax, an effective 3%.

Would a neighbouring state be cheaper than Michigan? No — Michigan is the cheapest of itself and its neighbours on these three lines, at $5,984.

Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.

Does this article include local income tax? Some Michigan localities levy their own income tax on top of the state figure above — for example Detroit (resident) 2.4%, Detroit (nonresident) 1.2%, Grand Rapids (resident) 1.5%, Highland Park (resident) 2%, Most other levying cities (resident) 1%. Rates vary by municipality, so this is not included in the total; check your own locality.

Will Michigan's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.

What to do next

Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the line this article says decides it
• The Relocation Tax Playbook — establishing domicile, and the states that contest it