# Retirement Taxes in Michigan (2026)

> Does Michigan tax Social Security, pensions or 401(k) withdrawals? The 2026 rules, rates, and what the state tax actually costs a retiree.

Source: https://savingslast.com/retirement-taxes-in-michigan/
Markdown: https://savingslast.com/retirement-taxes-in-michigan.md
Site: SavingsLast, free retirement drawdown calculators. Educational estimates, not advice.

**Very tax-friendly.** Income tax: flat 4.25%. Social Security: not taxed. Retirement account withdrawals: covered by the same subtraction for IRA withdrawals after 59½.

*Interactive calculator on the page: https://savingslast.com/retirement-taxes-in-michigan/. The same engine is the MCP tool how_long_will_money_last at https://savingslast.com/mcp.*

Seeded with roughly 10% — about 10% effective federal plus 0%, the Michigan tax on $40,000 of IRA withdrawals at 65 under 2026 rules. Change it to your own rate.

## What Michigan taxes in retirement

| State income tax | Flat 4.25% |
| --- | --- |
| Social Security | Not taxed |
| 401(k) and IRA withdrawals | Covered by the same subtraction for IRA withdrawals after 59½ |
| Pensions | From 2026 any retiree may subtract up to $67,610 single / $135,220 joint of retirement income |
| Military retirement pay | Fully exempt, separate from the retirement-income subtraction |
| Estate or inheritance tax | None |
| Average combined sales tax | 6% |
| Average effective property tax | 1.19% of home value |

Michigan spent a decade taxing pensions and finished unwinding it in 2026. Every retiree can now subtract up to $67,610 of retirement income, or $135,220 for a couple, which covers most private drawdowns.

## What the state tax actually costs you

Nothing. On a $500,000 balance withdrawn at $2,500 a month, federal tax alone brings the money down to about **18.8 years**, and Michigan adds none of its own. Every dollar of state tax a retiree avoids is a dollar that stays invested and compounds, which is why the difference between states widens over a long retirement rather than staying flat.

## The taxes that are not income tax

Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. Michigan charges an average combined sales tax of about **6%** and levies an average effective property tax of about **1.19%** of a home's value, which is above the national average.

There is no state estate or inheritance tax, so only the federal estate tax applies and its exemption is high enough that almost no estate owes it.

## How long $500,000 lasts here

Take a single 67-year-old with $500,000 in an IRA, the average Social Security check and $4,000 a month of spending. In Michigan that money runs out at 94, the same as in a state with no income tax. Counting Michigan's prices as well, it runs out at 97 and 9 months. [How long $500,000 lasts in every state](https://savingslast.com/how-long-500k-lasts-in-every-state/) compares all 51.

## Should you move for the tax?

Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use.

Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose.

## Frequently asked questions

**Does Michigan tax Social Security benefits?**

Not taxed. Your benefit may still be taxable federally once provisional income crosses the limits — see [is Social Security taxable](https://savingslast.com/is-social-security-taxable/).

**Does Michigan tax 401(k) and IRA withdrawals?**

Covered by the same subtraction for IRA withdrawals after 59½. Pensions are treated separately — From 2026 any retiree may subtract up to $67,610 single / $135,220 joint of retirement income.

**Does Michigan tax military retirement?**

Fully exempt, separate from the retirement-income subtraction. See [which states do not tax military retirement](https://savingslast.com/which-states-dont-tax-military-retirement/).

**Is Michigan a good state to retire in for taxes?**

Very tax-friendly on income tax. A 65-year-old single filer pays about 0% in state income tax on $40,000 a year of IRA withdrawals under the 2026 rules. Average combined sales tax is about 6% and effective property tax about 1.19% of home value. Estate or inheritance tax: none.

**Does Michigan have an estate or inheritance tax?**

No. Michigan levies neither an estate tax nor an inheritance tax, so only the federal estate tax applies, and its exemption is high enough that very few estates owe anything.

## Other tax-friendly states

- [Alaska](https://savingslast.com/retirement-taxes-in-alaska/)
- [Colorado](https://savingslast.com/retirement-taxes-in-colorado/)
- [Connecticut](https://savingslast.com/retirement-taxes-in-connecticut/)
- [Florida](https://savingslast.com/retirement-taxes-in-florida/)
- [Georgia](https://savingslast.com/retirement-taxes-in-georgia/)
- [Illinois](https://savingslast.com/retirement-taxes-in-illinois/)

## Compare and calculate

- [All 51 states compared](https://savingslast.com/retirement-taxes-by-state/)
- [States that tax Social Security](https://savingslast.com/social-security-taxes-by-state/)
- [Is Social Security taxable?](https://savingslast.com/is-social-security-taxable/)
- [Retirement withdrawal calculator](https://savingslast.com/retirement-withdrawal-calculator/)
- [How long $500k lasts](https://savingslast.com/how-long-will-500k-last-in-retirement/)
- [How much do I need to retire?](https://savingslast.com/how-much-do-i-need-to-retire-with-social-security/)

SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.

Reviewed for the 2026 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the Michigan tax agency (listed at [taxadmin.org](https://taxadmin.org/state-tax-agencies/)) or a tax professional before acting. The effective rate is a planning figure, not a filing figure.