Michigan Tax Guide: Flat 4.05% Income Tax

Tax Overview

Michigan levies a flat income tax rate of 4.05% on all taxable income. The rate has fluctuated over the years but has been relatively stable around this level. Notably, some Michigan cities impose their own income taxes on top of the state rate, with Detroit levying the highest city rate at 2.4% for residents. About two dozen cities in Michigan have local income taxes, typically at 1% for residents.

Sales tax in Michigan is 6% with no local additions, providing a uniform rate statewide. Michigan exempts groceries and prescription drugs from sales tax. The state also does not levy sales tax on clothing. Michigan's sales tax revenue is constitutionally earmarked, with a significant portion going to fund K-12 education.

Property taxes in Michigan are above the national average, with effective rates around 1.38%. The state uses a complex system where properties are assessed at 50% of market value, and annual increases in taxable value are capped at the rate of inflation or 5%, whichever is lower. This cap is uncapped when a property is sold, meaning new buyers may see significant tax increases. Michigan offers a principal residence exemption that exempts homeowners from a portion of school operating taxes.