Michigan 2026 Income Tax: Flat 4.25% Rate and Deductions

(MICHIGAN) Michigan will keep taxing individual income at a flat income tax rate of 4.25% for tax year 2026, meaning the same percentage applies to every dollar of Michigan taxable income after allowed deductions and exemptions. For immigrants building a life in Michigan—new workers, international students, and new permanent residents—this simple rule still has real paperwork and budgeting effects.

Michigan uses federal adjusted gross income as a starting point, then applies state additions and subtractions to reach Michigan taxable income. After exemptions or deductions, the state multiplies what remains by 4.25%, and employers withhold using Treasury tables tied to that rate.

Who generally has to file Michigan income tax

You usually file a Michigan individual income tax return if you are a resident or part-year resident and you have income that Michigan taxes. For many immigrants, “resident” for state tax follows where you live and keep your home, not your federal immigration status.

Common groups who file include:

• New hires on work visas living in Michigan during 2026
• Spouses and dependents who work or have investment income
• International students and scholars with Michigan-source wages
• New retirees receiving pension income that may qualify for Michigan deductions

Nonresidents often file if they earned Michigan-source income, such as wages from a Michigan employer. Keep records that show when you moved in or out, because part‑year residency can affect what income Michigan taxes.

2026 rate rule and why “flat” matters

Michigan’s system is flat. That means there are no state tax brackets and no marginal rate calculations inside the state return. After Michigan calculates taxable income, it applies the same 4.25% rate for single filers, married filing jointly, head of household, and other individual filers.

For immigrant households used to progressive systems abroad, the change is mostly in planning. A raise does not push you into a higher Michigan rate. The main variables are your taxable income after Michigan adjustments, and whether you qualify for deductions like retirement benefits.

Key point: the flat rate simplifies percentage math, but your taxable income after Michigan-specific adjustments still determines the tax you owe.

Retirement and pension deductions phased in through 2026

Michigan’s “Lowering MI Costs Plan,” enacted as Public Act 4 of 2023, phases in larger pension and retirement benefit deductions through tax year 2026. The phase-in schedule differs by birth year and filing status, and it reduces Michigan taxable income for eligible retirees.

This matters for immigrant retirees and “snowbird” families who spend part of the year in Michigan. A pension deduction can lower the base that the 4.25% flat income tax rate applies to. It also affects withholding choices for retirees who ask a pension administrator to withhold Michigan tax.

When you plan for 2026, treat pension deductions as rules-based benefits. Confirm eligibility before assuming a lower tax bill, especially if you became a Michigan resident recently or receive retirement income from multiple sources.

Documents immigrants should gather before filing

Michigan taxable income starts from your federal return, so good federal documentation makes the state return easier. Keep both immigration and tax records, because they support identity, residency dates, and income.

Typical documents include:

• Passport biographic page and current visa or green card, to support identity and entry dates
• Social Security number card, or an ITIN assignment letter if you file with an ITIN
• Federal tax return copy, including supporting schedules
• Wage statements (Form W‑2) and any 1099 forms for interest, dividends, or contract work
• Proof of Michigan residence, such as a lease, utility bills, or a Michigan driver’s license
• Pension statements if you expect retirement deductions under Public Act 4 of 2023

For an ITIN, the federal application is Form W-7, filed with the IRS under strict documentation rules. The official form and instructions are on the IRS website at IRS Form W-7. Most workers file a federal return on Form 1040; see IRS Form 1040.

Withholding: what to check on your paystub

Many immigrants first notice Michigan tax through payroll withholding. Michigan’s Treasury publishes employer withholding details, including the 4.25% rate used for withholding and personal exemption amounts used in calculations. Employers rely on those tables, so mistakes can repeat every pay period.

If your withholding looks off, act early in 2026:

1. Review your paystub and confirm Michigan withholding is taken.
2. Update your personal information with HR if you recently moved.
3. Keep proof of residency dates if you are a part‑year resident.
4. Recheck withholding after any job change, bonus, or switch to remote work.

Michigan’s official withholding information is posted by the state at Michigan Department of Treasury withholding tax information.

Filing process overview, including common immigrant issues

Most filers begin with the federal return, then prepare the Michigan return using the federal numbers as a starting point. Because Michigan applies a flat income tax rate, the key work is getting the Michigan taxable income figure right, including any allowed exemptions or retirement deductions.

Immigrant families often run into these practical issues:

• Mixed-status households where one spouse has an SSN and the other uses an ITIN
• First-year residents who earned income before moving to Michigan
• Retirees with pension income and questions about the 2026 phase-in rules

According to analysis by VisaVerge.com, state tax compliance is also an immigration stability issue, because clean filings help when you later document lawful employment, household income, or continuous residence for benefits.

Practical tips to meet requirements and avoid surprises

Budgeting is simpler with 4.25%, but deductions and residency rules still drive outcomes. A few habits reduce risk:

• Save every W‑2 and 1099 as soon as you receive it.
• Track move-in and move-out dates, with documents that show where you lived.
• If you are a retiree, keep the pension plan’s annual statement and any Michigan withholding forms you submit.
• File on time even if you cannot pay in full, because late filing penalties can grow faster than the tax itself.

For most newcomers, the best mental model is simple:

1. Start with your federal income picture (federal adjusted gross income).
2. Apply Michigan-specific adjustments and exemptions to reach Michigan taxable income.
3. Multiply the result by the 4.25% flat income tax rate.

This makes the math easy but still demands careful recordkeeping and attention to state-specific rules.