Michigan

Tax Rate Range: Flat rate of 3.9% of federal adjusted gross income with modifications; some cities impose additional income taxes.
Personal Exemptions: Single - $3,300; Married - $6,600; Dependents - $3,300; Persons 65 or older can claim an additional $2,100 exemption.
Standard Deduction: None
Medical/Dental Deduction: Medical expenses in excess of 3% of household income are deductible.
Federal Income Tax Deduction: None
Retirement Income Taxes: Social Security, military, federal, and state/local government pensions are exempt. Private pension income is exempt up to $40,920 (individual filers) or $81,840 (married filing jointly). These private pensions are reduced by the amount of any public pension deduction claimed. Taxpayers 65 or older may deduct interest, dividends, and capital gains up to $9,128 (individual filers) or $18,255 (married filing jointly). These deductions are reduced by any pension exemption taken. Federal and Michigan public pensions are totally exempt. Public pensions include benefits received from the federal civil service, State of Michigan public retirement systems and political subdivisions of Michigan, military retirement and Tier 2 railroad retirement. If the conditions of the plan under step one are met, then these payments are totally exempt from Michigan income tax. Michigan residents can treat the public pensions received from the following states as totally exempt: Alaska, Florida, Hawaii, Illinois, Massachusetts, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming. Michigan residents who receive public pensions from other states are subject to the private pension exemption limits. Michigan residents who receive public pensions from states not listed above are subject to the private pension exemption limits. Private pension subtractions are limited to $40,920 on a single return and $81,840 on joint returns for tax year 2006. Click here for FAQs.

State Tax Software

Retired Military Pay: Not taxed. Survivor benefits are exempt if the amounts are exempt from federal income tax or classified as military compensation or military retirement pay. Military retirement benefits that pass to the spouse of a deceased member of the military are exempt. Retirement benefits passing to other beneficiaries are taxed.
Military Disability Retired Pay: Disability Portion - Length of Service Pay; Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless combat incurred. Retired Pay - Based solely on disability: Member on September 24, 1975 - No tax; Not Member on September 24, 1975 - Taxed, unless all pay based on disability and disability resulted from armed conflict, extra-hazardous service, simulated war, or an instrumentality of war.
VA Disability Dependency and Indemnity Compensation: Not subject to federal or state taxes
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.

Sales Taxes

State Sales Tax: 6% (food and prescription drugs exempt; home heating fuels are taxed at 4%)
Gasoline Tax: 30.8 cents/gallon
Diesel Fuel Tax: 30.6 cents/gallon
Cigarette Tax: $2.00/pack of 20

Property Taxes

Property in Michigan is generally assessed at 50% of its true cash value. Some seniors, disabled persons, veterans, surviving spouses of veterans and farmers may be able to delay paying property taxes. It depends on the county of residence and your income level. If you own the home you live in, you may be exempt from a portion of local school taxes under the Homeowner's Principal Residence Exemption Program, formerly known as the Michigan Homestead Exemption Program. It allows homeowners an exemption from their local School Operating Millage. In accordance with Public Act 237 of 1994, homeowners that occupy their property as their principal residence may exempt up to 18 mills. A homestead property tax credit is available to homeowners or renters. The credit is based on the property tax on a homestead that is subject to local property taxes or your household income. Only those whose household income is less than $82,650 are eligible. For information on the homestead credit, call 517-334-7076. For other property tax matters, call 517-373-0500. To view the state's property tax estimator, click here.

Estate Taxes

There is no inheritance tax and a limited estate tax related to federal estate tax collection.
For further information, visit the Michigan Taxes web site. Seniors are invited to click here or call a special assistance number: 800-487-7000.