Does Michigan tax Social Security?

No. Michigan fully exempts Social Security benefits from state income tax. Social Security is subtracted entirely from your Michigan taxable income, so it never contributes to your 4.25% state tax.

Does Michigan tax pensions and 401(k) withdrawals?

Yes, but with a significant deduction. Under the 2023 Lowering MI Costs law, Michigan is phasing back in a retirement-income deduction that shelters a large portion of pension, IRA, and 401(k) income. Income above the deduction is taxed at the flat 4.25%.

What is the Michigan retirement-income deduction?

It is a subtraction that lets retirees exclude pension and other retirement income up to an annual limit that depends on your age and the phase-in year. The phase-in runs through 2026, when the deduction reaches its full level for all eligible retirees.

Is the retirement deduction the same for everyone?

No. The deduction amount varies by birth year and filing status during the phase-in, and married couples generally receive a larger combined limit than single filers. Check the current Michigan tax instructions for your specific allowance.

How accurate is this calculator?

It accurately exempts Social Security and applies the flat 4.25% to retirement income above the deduction you enter. Because the deduction varies by birth year and phase-in tier, you supply the allowance; the calculator does the rest.

Michigan Retirement Income Tax Calculator

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Michigan treats retirement income generously: Social Security is fully exempt, and a growing retirement-income deduction shelters much of your pension, IRA, and 401(k) money. Whatever is left is taxed at the flat 4.25%. This calculator separates your income sources and applies each rule correctly.

How it works

The calculator handles each income type by its Michigan rule:

Exempt Social Security. Your Social Security benefits are subtracted entirely — they are never taxed by Michigan.
Apply the retirement deduction. Your pension, IRA, and 401(k) withdrawals are pooled, then reduced by your Michigan retirement-income deduction allowance.
Tax the remainder. Whatever retirement income remains above the deduction is taxed at the flat 4.25%.

So taxable = max(0, pension + iraWithdrawals − deduction) and tax = taxable × 0.0425. Social Security is excluded from this base.

Tips and example

A retiree with $24,000 of Social Security, a $30,000 pension, and $10,000 of IRA withdrawals, with a retirement deduction allowance of $35,000, has taxable retirement income of $30,000 + $10,000 − $35,000 = $5,000. Michigan tax is $5,000 × 4.25% = $212.50. The Social Security is fully exempt and adds nothing.

The deduction allowance grows each year through the 2026 phase-in, so retirees owe progressively less. Your exact allowance depends on your birth year and filing status — enter the figure from the current Michigan tax instructions for an accurate result.