Not sure how to start figuring your state income taxes? Take advantage of our Michigan income tax calculator to be sure you’re adequately prepared to file your next state tax return. Our Michigan state income tax calculator uses current tax regulations and rates to estimate what you can expect to pay when filing your state taxes.

Tax prep can be complex..and no one wants to arm wrestle the IRS. Our resources and our team of tax professionals are here to help ensure you’re in compliance with both state and federal policies, and saving the most on your annual state and federal tax returns.

Before we jump into Michigan’s state tax structure, let’s first clear up the differences between state and federal taxes, what state taxes mean for Michiganders (Michiganians, Michiganites), and the major state tax rates applied to Michigan taxpayers.

Federal taxes are mandated by the federal government across each of the 50 states using standardized rates and structures. When collected, these fees support various government programs such as: federal insurance plans, defense, research, education, and other federal expenditures. Federal taxes are collected by the U.S. Internal Revenue Service (IRS), and the rates are regulated across the board, no matter which state you live in.

State taxes on the other hand, are separate from federal taxes and are controlled by each state’s individual government (many counties and local governments impose their own taxes, too.) This means tax rates can vary from state to state and some states might not even inflict certain taxes at all. This difference makes it especially important for taxpayers (like you) to familiarize themselves with tax laws in their respective state so they can file correctly and save the most on their annual return.

As we mentioned, state tax rates and structures vary depending on location. If you’re wondering what Michigan state taxes look like, you’re in the right place. Below are the major Michigan state tax rates for your quick reference—but stick with us to dive into even more detail that will help you prep and plan for your next tax bill in the Wolverine State.

Michigan charges a flat income tax rate of 4.25% for their residents. This means that there is a single tax bracket that taxpayers are categorized within, and each taxpayer pays the same rate in income taxes. Depending on which Michigan city you live in, you may be subject to an additional income tax. See the city income tax rates in the table below to find out if your area charges income taxes.

Are Michigan income taxes different than other states? Absolutely. Many states use a bracket system to tax residents based on their annual income—the more money you make, the higher taxes you’re likely to pay. Arizona for example, has a tax rate range of 2.59-4.54% with five different corresponding tax brackets. Other states like Washington and Wyoming don’t have any brackets set up because they don’t collect personal income taxes at all (lucky them).

Self-employment has a lot of great perks: working from the comfort of your couch, being your own boss, etc. But many taxpayers are scared off by the high taxes imposed on the self-employed by the federal government. The federal self-employment tax rate is 15.3% of the individual’s taxable income. Of the 15.3%, 12.4% goes toward Social Security and 2.9% goes toward Medicare funding.

The good news is Michigan residents who are self-employed don’t need to worry about paying additional state taxes on their self-employment income. Just be sure to budget for federal self-employment taxes so you’re not caught off guard with a big tax bill at the end of the year.

The Michigan income tax rate is 4.25% of taxpayers’ federal adjusted gross income (AGI). This rate is applied to all Michigan state taxpayers, regardless of their income since the state subscribes to a single tax bracket rather than a multi-tiered system. In other words, you and your neighbor will be paying the same income tax rate no matter what your monthly paychecks look like.

If you invest your money into assets such as real estate, stocks, bonds, or collectibles, you may want to figure your state’s capital gains tax rate before selling. The capital gains tax is imposed on the profit made after an asset is sold by the taxpayer, both on the federal and state levels.

The Michigan capital gains tax is taxed as regular income at 4.25%, which places the state in position 13 for best business tax climates in the country, according to a study by the Tax Foundation.

Remember your first solo trip to the mall as a kid? You had your allowance in hand and ready to buy the latest and greatest new toy or game on the market—you got to the register, ready to hand over your hard-earned cash, and you were short a few bucks, thanks to sales tax.

Sales tax is controlled by states rather than the federal government, and they’re used for a myriad of state-funded programs, resources, and services such as schools, road construction, and police and fire departments. No one likes being deceived every time they arrive at the register, but the reality is, state taxes are likely here to stay, unless you live in one of four states that don’t implement them such as Oregon, New Hampshire, Montana, and Delaware.

Each state can use their own discretion on state sales tax rates, some even reach a shocking 7.25% (looking at you, California). Michigan’s standard sales tax rate is 6% of the total purchase.

You can think of use tax like sales tax’s close relative. They both tax consumer goods and are charged at the point of purchase, but use tax is more focused on online retailers rather than brick and mortar stores. Use taxes are charges to out-of-state vendors that bring in products and make transactions online, over the phone, or by mail. Michigan’s use tax is the same rate as sales tax at 6% of the sale when sales taxes have not already been applied.

Sales and use taxes appear pretty much every time you make a purchase, whether it’s online or in person (some states even tax groceries!) Thankfully Michigan residents need not worry about sales taxes running up their grocery bill, but they should keep in mind where else they can expect to see state sales taxes on their regular shopping trips.

• Sales Tax: 6% on the total price of tangible personal property, including shipping and handling fees. 4% on the sale of electricity, natural or artificial gas, and home heating fuels.

• Use Tax: 6% on the purchase price of online, mail, or phone transactions when sales taxes have not been applied. Use taxes can also be imposed on services such as telecommunications and hotel and motel accommodations.

Excise taxes (also known as “sin taxes”) are taxes imposed by federal, state, or local governments on certain products. Oftentimes the products that are taxed are those that might be harmful to a taxpayer’s health or the environment; tobacco and alcohol excise taxes are some of the most common examples.

These taxes can be charged directly to the consumer, or they can be imposed on the vendor. If the latter is the case, consumers can generally expect this extra cost to be built into the price of the product. Each state has their own way of structuring excise taxes—New York for example, charges an additional $4.35 per package of 20 cigarettes.

As for excise taxes in Michigan, let’s discuss the 6 taxes you should be familiar with as a resident or visitor in the Wolverine State.

Before you indulge in your favorite beer, wines, and spirits in the state of Michigan, you may want to take a moment to consider the state’s excise taxes on alcohol. Keep in mind, these taxes are already included in the product price by the retailer, so your excise taxes will be paid up front, not on your state tax return.

The Michigan tobacco tax is charged to the consumer of tobacco products at the time of their purchase. The tax applies to cigarettes, blunts, cigars, and a number of other tobacco-related products, like chewing tobacco.

The tobacco tax rate in Michigan is:

• Cigarette tax rate: $0.10 per individual stick, or $2.00 per pack of 20
• Other Tobacco Products (cigars, smokeless tobacco, non-cigarette smoking tobacco): 32% of the wholesale price

As of 2018, the state of Michigan joined California, Oregon, Washington, Colorado, and other “green” states to fully legalize recreational and medicinal marijuana. No matter which side of the marijuana debate you stand, one thing is for sure...your freedom to consume definitely comes at a cost. If you’re sensing a pattern here, you’re right. Marijuana also falls under the “sin tax” category along with the sale of alcohol and tobacco, meaning that the state government imposes an excise tax on the business or consumer (depending on how the state decides to structure their taxes).

In Michigan, marijuana has an excise tax of 10% of the sales price of marijuana sold to anyone other than a marijuana establishment. This tax is charged to the marijuana retailer, but consumers can expect to see this added fee built into the prices of the products they purchase.

Just like alcohol, marijuana, and tobacco are considered vices in the eyes of state and federal government, our fuel consumption is considered a bad habit, too. For this reason (and for the love of the environment), each state charges their own excise tax on fuel.

The excise tax for motor fuel purchased after January 1, 2017 are:

• Gasoline: $0.263 per gallon
• Diesel: $0.263 per gallon
• Alternative Fuel (including liquid petroleum gas): $0.263

If you bought or acquired ownership of a vehicle in Michigan this tax year, the transaction will be subject to a 6% excise tax on the purchase price of the vehicle, or its fair market value (whichever is greater). However, if you purchased or acquired the vehicle from an immediate family member, you will be exempt from the 6% car tax.

An immediate family member is defined as:

Cell phones have pretty much become essential to survival in the 21st century, creating the perfect opportunity for the federal and state governments to cash in on the trend. If you’ve noticed some extra charges on your cell phone bill, you’re likely looking at federal and state excise taxes.

The federal excise tax for cell phone plans is 3% and the rate for each state varies. Michigan's cell phone plan excise tax is 6% and is charged to the taxpayer’s monthly cell phone bill.

In the state of Michigan, insurance companies are subject to a premiums tax instead of having to pay the corporate income tax of 6%. The insurance tax rate charges companies 1.25% of gross direct premiums written on risk or property within the state of Michigan.

You might be asking yourself: what does the insurance tax have to do with me? Well, if you know one thing about insurance companies, it’s that they’re in the game to turn a profit. You may see an increase in your premium costs to accommodate for the taxes imposed on your insurance company by state governments.

According to the Institute on Taxation and Economic Policy, state property taxes were once the primary source of income for state and local governments at the start of the twentieth century. Some state property taxes even accounted for up to 80% of the state’s annual revenue before sales and income taxes came into the picture. Property taxes are used to support a number of state-funded programs such as education and local expenses.

If having the longest freshwater shoreline in the world as your backyard is on the list for your next home, you might want to build Michigan property taxes into your budget. At an average property tax rate of 1.62% of a property’s assessed fair market value, Michigan is in eighteenth place for most property taxes collected in the U.S.. For a home worth Michigan’s median value of $132,200, homeowners would expect to pay the median property tax of $2,145.

When a loved one dies, family members may be left with certain assets like property or money by inheritance. This scenario can provide some financial relief to the grieving, but not without some interference from taxes.

Many states impose an inheritance or estate tax on items when they’re passed on to their heirs. Michigan’s inheritance tax is still in effect, but only applies to taxpayers who inherited from an individual that died on or before September 30, 1993.

A tax credit is a type of tax incentive that is offered by both the federal government and certain state governments. Tax credits reduce taxpayers’ total tax liability dollar for dollar when they claim credit(s) on their annual tax return. In order to claim these savings, the taxpayer must meet specific requirements outlined by the IRS or state government, depending on which return they’re filing for. When it comes to state taxes, each state has different tax credits that benefit their local residents. For Michigan taxpayers, we’ve listed three main tax credits that may apply to your next tax return.

The earned income tax credit is a federal tax credit that helps low and moderate-income families save on their tax bill by reducing their tax liability dollar for dollar based on their annual income. In addition to the federal EITC initiative, Michigan taxpayers can also save on their state taxes with the state’s version of the credit. Those who qualify for the federal EITC are also eligible to claim a state credit for up to 6% of the value of their federal EITC.

This means that if the taxpayer was approved to claim a $2,500 earned income tax credit on their federal taxes, they would be eligible to save $150 on their state taxes based on Michigan’s EITC rate.

Michigan summers are known for breathtaking lakes, lounges by the shore, and plenty of fun-filled water sports. But when winter rolls around, the scene is a totally different story with temperatures regularly falling below freezing and thermostats dramatically escalating (which can really do some damage to your utility bill).

The good news is, the state of Michigan recognizes the importance of heating your home during those unforgiving months of winter, and they help offset the cost by offering a home heating credit for qualifying homeowners and renters.

To claim the credit, you must meet the following requirements:

• You must occupy a MI homestead
• You own your home or you pay rent as part of a contract
• You were not a full time student who was claimed as a dependent on another taxpayer’s return
• You did not live at a college or university operated housing residence for the entire year
• You did not live in a licensed care facility for the whole year
• Your income falls within the credit’s maximum income criteria, based on how the home heating credit is calculated

The home heating credit is calculated one of two ways:

• Using the standard credit allowance
• Using your home heating costs

Keep in mind: this credit cannot be used for vacation homes, so try to limit your heat usage at your summer home while you’re away!

To claim the home heating credit and cozy up to your tax savings, file form MI-1040CR-7.

If all of this talk about homeownership costs and taxes is making you sweat, hang in there, the homestead property tax credit is here to provide some much needed relief. The state of Michigan’s homestead property tax credit is designed to help Michigan homeowners reduce the amount of property taxes they pay if they meet the state’s requirements:

• Your homestead must be in MI
• You were a resident of Michigan for six months or more during the applicable tax year
• You own the home or pay rent as part of a contract
• You occupied the home on which property taxes were levied
• Your home’s taxable value is $135,000 or less if you own your home
• Your total household’s resources are $60,000 or less

To claim the homestead credit and save on your property taxes, you must file MI-1040CR.

Tax credits and tax deductions both work to reduce a taxpayer’s total tax liability, but they go about it a bit differently. While tax credits subtract from an individual’s tax bill, a tax deduction lowers the taxpayer’s taxable income. This means the more deductions the taxpayer is able to claim, the lower their taxable income is, and therefore, the less taxes they’re subject to pay.

Just like states can have their own tax credits, they can also offer their own tax deductions based on needs and initiatives in their state. Hawaii for example, allows taxpayers to deduct up to $3,000 per ‘exceptional tree’ planted in an effort to preserve their state’s unique ecology. As for the Great Lakes State, you can look forward to 18 tax deductions you may be able to claim on your Michigan state tax return.

Michigan’s standard deduction allows qualifying taxpayers to deduct up to $20,000 on single or married filing separately returns; or $40,000 for married filing jointly returns. To claim the standard deduction in Michigan, you or your spouse must have been 67 years or older on or before December 31, 2018. If you qualify and claim the standard deduction in Michigan, you will no longer be able to deduct pension or retirement income on your Michigan state tax return.

The Michigan itemized deductions for 2018 filers included:

• Income from U.S. government obligations (Series EE Bonds, Treasury notes, etc.)
• Military, Michigan National Guard and taxable railroad retirement benefits
• Gains from federal column of Michigan MI-1040D and MI-4797
• Income attributable to another state
• Compensation received for active duty in U.S. Armed Forces and taxable Social Security
• Renaissance zone deduction
• Michigan state and city income tax refunds and homestead property tax credit refunds
• Contributions made to accounts established through MESP
• Contract price for a MET contract
• Charitable contributions to MET programs
• Gross income from Michigan oil and gas activity and nonferrous metallic minerals extraction
• Exempted Resident tribal member income
• Michigan NOL
• Amount used to determine the credit for elderly or totally and permanently disabled
• Holocaust victim payments
• Qualifying retirement and pension benefits
• Dividends, interest, and capital gains for senior citizens

Not sure where to start calculating your Michigan tax refund? Head over to our Michigan tax calculator to estimate what you can expect to pay in state taxes, and if you should anticipate a refund in your mailbox after you’ve filed. All you’ll need to use our intuitive tool is your: AGI, zip code, number of exemptions and dependents, and any credits or tax deductions you qualify for.

Here are a few tips to help you file your Michigan tax return:

• If you’re a W-2 employee, make sure you’ve collected an accurate IRS Form W-2 from your employer before filing your state or federal taxes. Double check that your annual wages and withholdings are displayed correctly, and update your W-4 if your employer did not withhold enough taxes from your paychecks this year.
• Refer to Michigan’s list of tax deductions and credits to help you save the most on your state tax return.
• If claiming any deductions or credits on your tax return, collect any necessary documents to support your claim. A charitable donation for example, will require supporting receipts and paperwork in order to be compliant with tax regulations.
• You can check the status of your tax refund, use the “Where’s My Refund? Feature on the Michigan Department of Treasury website.

Not sure where to start calculating your Michigan tax refund? Head over to our Michigan tax calculator to estimate what you can expect to pay in state taxes, and if you should anticipate a refund in your mailbox after you’ve filed. All you’ll need to use our intuitive tool is your: AGI, zip code, number of exemptions and dependents, and any credits or tax deductions you qualify for.

Here are a few tips to help you file your Michigan tax return:

• If you’re a W-2 employee, make sure you’ve collected an accurate IRS Form W-2 from your employer before filing your state or federal taxes. Double check that your annual wages and withholdings are displayed correctly, and update your W-4 if your employer did not withhold enough taxes from your paychecks this year.
• Refer to Michigan’s list of tax deductions and credits to help you save the most on your state tax return.
• If claiming any deductions or credits on your tax return, collect any necessary documents to support your claim. A charitable donation for example, will require supporting receipts and paperwork in order to be compliant with tax regulations.
• You can check the status of your tax refund, use the “Where’s My Refund? Feature on the Michigan Department of Treasury website.

If you find that you owe Michigan state taxes this year, you’ll need to use one of the state’s three payment methods to fulfill your tax bill by the tax deadline (April 15). If payment is not submitted by the tax deadline, penalty and interest will be added to your dues until you’ve completed the payment in full.

You can pay your Michigan state taxes using the following payment methods:

• eCheck
• Debit or credit (Visa, MasterCard, and Discover)

This information is accurate as of 2019. Taxpayers should consider special circumstances which may impact their individual state tax return.