Does Michigan Tax Retirement Income?

No. Michigan does not tax Social Security benefits.

Social Security benefits are deductible from Michigan income.

The Michigan answer is separate from the federal one. Depending on combined income, up to 85% of Social Security benefits can be taxable on the federal return regardless of what Michigan does, so the state rule changes the state line only. Our guide to states that do not tax Social Security shows where Michigan sits among the states that still tax benefits.

Partly. Michigan taxes some pension income, subject to an exclusion or age rule.

For 2026, most qualifying public and private retirement benefits can be deducted up to $67,610 for a single filer or married person filing separately and $135,220 on a joint return. Some older retirees and public-safety recipients have different rules.

The 2026 phase-in reaches 100% of the private-pension limit: $67,610 for single and married-filing-separately returns and $135,220 for joint returns. It does not create an unlimited deduction for every retirement distribution. Public, private, military, and railroad deductions coordinate within the statutory cap for many filers.

Public and private pensions, annuities, and retirement-plan distributions do not always get the same treatment. The pension comparison lists which states exempt pensions broadly, partly, or only for certain plans.

Partly. Michigan taxes some traditional 401(k) and IRA withdrawals, subject to an exclusion or age rule.

Qualifying IRA and defined-contribution payments can be included in the retirement subtraction, but plan eligibility and timing requirements apply.

Two timing points matter in Michigan. A Roth conversion is taxable in the year it is done, and Michigan starts from federal adjusted gross income, so a large conversion can land in a year when the state exclusion does not cover it. Qualified Roth withdrawals later are generally not taxable at either level. Required minimum distributions follow the same Michigan rules as any other traditional-account withdrawal.

Every state page on this site runs the same retiree profile so the states can be compared: $30,000 of Social Security, $40,000 withdrawn from a traditional 401(k), and a $20,000 private pension, $90,000 in total.

A single retiree with $30,000 of Social Security, $40,000 from a qualifying 401(k), and a $20,000 qualifying pension can deduct Social Security and may deduct the full $60,000 of other retirement income because it is below the $67,610 limit for 2026. A larger distribution can exceed that cap.

Michigan starts from federal AGI of about $85,500 and deducts the $25,500 of federally taxable Social Security separately, outside the retirement cap. The $40,000 401(k) distribution and $20,000 pension total $60,000, which sits below the 2026 single limit of $67,610, so the full $60,000 is subtracted and Michigan taxable income is $0 before the $5,900 personal exemption is even applied. Contrast: a $150,000 lump-sum IRA withdrawal pushes qualifying retirement income to $210,000, the subtraction stops at $67,610, and after the $5,900 exemption about $136,500 is taxed at 4.25%, roughly $5,800. Spreading that withdrawal across three tax years, at $50,000 a year on top of the $60,000, keeps each year at $110,000 against a cap that indexes upward, and would cost roughly $1,800 a year instead. On a joint return the cap is $135,220, so the same one-year lump sum would leave only about $75,000 exposed, roughly $2,900 of tax after one exemption.

The same $90,000 profile looks different a state line away. The rows below come from the reviewed 51-state table; each state name links to its own guide.

• Ohio: treats Social Security as exempt, pensions as taxed, and 401(k) and IRA withdrawals as taxed, with a top rate of 2.75% and retirement-income and senior credits may apply.
• Indiana: treats Social Security as exempt, pensions as taxed, and 401(k) and IRA withdrawals as taxed, with a top rate of 2.95% and federal civil-service deduction may apply.
• Florida: has no individual income tax at all.

The phrase pension tax repeal can mislead. Michigan restored a much larger subtraction, but eligibility and an indexed ceiling still matter for a retiree taking a large one-time distribution.

Military retirement: Qualifying U.S. Armed Forces retirement benefits are deductible from Michigan income. See the military retirement tax map for every state's treatment.

Estate and inheritance tax: Michigan has no separate estate or inheritance tax.

Selling a home or investments in Michigan: retirement-income rules do not cover capital gains. See Michigan capital gains tax before selling appreciated property or a brokerage position in the year you move or retire.

• Confirm the exclusion you are claiming. The 2026 phase-in reaches 100% of the private-pension limit: $67,610 for single and married-filing-separately returns and $135,220 for joint returns. It does not create an unlimited deduction for every retirement distribution. Public, private, military, and railroad deductions coordinate within the statutory cap for many filers.
• Part-year residents. If you moved into or out of Michigan during the year, retirement income is generally allocated to the period of residency, and the former state may still tax distributions received before the move. Document the move date, the new domicile, and where each distribution was received.
• Withholding and estimates. Pension and IRA custodians often withhold federal tax but not Michigan tax. If Michigan taxes any part of your retirement income, check whether quarterly estimated payments are needed to avoid an underpayment penalty.
• Federal side. The federal return has its own rules: up to 85% of Social Security can be taxable, the temporary $6,000 federal senior deduction is available for 2025 through 2028 subject to income limits, and Roth conversions are taxed in the conversion year. State exemptions do not change any of that.
• Large one-time distributions. Compare a large lump-sum distribution with spreading withdrawals across tax years. A one-year amount above the indexed subtraction limit can create Michigan tax that smaller annual withdrawals avoid.

Comparing states before a move? Use the retirement taxes by state table and the moving states tax guide, and read retirement tax planning for how distributions, conversions, and a move are sequenced together.