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Official Tax Guide

Michigan Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Michigan state taxes. Income tax (4.25% (Flat)), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

Michigan State Tax Guide 2025

Moving to Michigan involves navigating the state's tax landscape. This guide provides an overview of Michigan's tax structure for 2025, focusing on income, sales, and property taxes, along with other relevant levies.

1. Income Tax

Michigan utilizes a flat income tax rate for all taxpayers, regardless of income level.

  • Rate: The state income tax rate is 4.25%.
  • Structure: This is a flat tax. Unlike progressive tax systems where rates increase with income, every taxable dollar earned in Michigan is subject to the same 4.25% rate (after allowable deductions and exemptions).
  • Filing: Residents file an annual return with the Michigan Department of Treasury.

2. Sales Tax

Michigan's sales tax applies to the retail sale of most goods and some services.

  • State Rate: The statewide sales tax rate is 6%.
  • Local Taxes: While the state rate is uniform, local jurisdictions (cities, counties, or transit authorities) may levy additional taxes on specific items, such as lodging or specific local services. This can result in a total rate higher than 6% for certain transactions. Always check local ordinances for precise rates on services like dining or hotels.

3. Property Tax

Property taxes in Michigan are primarily levied by local government entities (school districts, counties, cities) to fund public services.

  • Assessment Basis: Taxes are based on the assessed value of real property, which is generally 50% of the property's market value.
  • Rates and Burden: Michigan's effective property tax rates vary significantly by location but often hover around the national average. For context, the national average effective rate is approximately 1.1% of home value. However, in Michigan, rates can range from roughly 1.0% to 2.0% of assessed value depending on the specific millage rates in your municipality.
  • Homestead Property Tax Credit: Michigan offers a property tax credit for homeowners and renters who meet certain income requirements, which can help offset the cost for qualifying residents.

4. Other Taxes

Beyond income, sales, and property, Michigan imposes several other taxes that may impact your budget:

  • Gas Tax: Michigan imposes a tax on gasoline, which contributes to road funding. This is included in the price per gallon at the pump and fluctuates based on fuel prices and state legislation.
  • Sin Taxes: Excise taxes are levied on specific goods, including tobacco products and alcohol (beer, wine, and spirits). Rates vary by product type.
  • Inheritance Tax: Michigan does not levy an inheritance tax as of 2025. However, federal estate taxes may still apply depending on the estate's value.

5. Retiree Taxes

For retirees, Michigan offers a favorable tax environment regarding retirement income.

  • Retirement Income: Most retirement income, including Social Security benefits, pension income, and distributions from retirement accounts (like 401(k)s and IRAs), is exempt from Michigan state income tax.
  • Taxable Income: Taxable income for retirees typically includes wages from employment (if still working) and income from non-retirement investments.

6. Comparison to Neighbors

Here is a brief comparison of Michigan's tax environment with its neighboring states (as of 2025 estimates):

  • Illinois: Has a flat income tax rate (currently 4.95%) and a 6.25% state sales tax. Property taxes in Illinois are generally higher than in Michigan.
  • Indiana: Features a flat income tax rate (3.05% in 2025) and a 7% state sales tax (includes a 7% state rate + 7% local option). Property taxes are relatively low.
  • Ohio: Uses a progressive income tax system (rates range from 2.75% to 3.5% for 2025). Sales tax is 5.75% state + local. Property taxes can be moderate to high.
  • Wisconsin: Has a progressive income tax (rates range from 3.5% to 7.65% for 2025). Sales tax is 5% state + local. Property taxes are moderate.
  • Summary: Michigan's flat 4.25% income tax rate is competitive compared to many neighbors, though Indiana's rate is lower. Michigan's 6% sales tax is generally lower than Indiana's total rate but comparable to Illinois and Ohio when local taxes are factored in. Property tax burdens in Michigan are often perceived as more moderate than in Illinois or Ohio, depending on the specific locale.

Disclaimer: Tax laws change frequently. Consult a CPA.