Michigan Tax and CPA Services: State, County and City Taxes

Michigan taxes individuals at a flat 4.25 percent, taxes C corporations at 6 percent, prohibits local sales taxes, and lets 24 cities charge their own income tax. If you live or work in Detroit, Grand Rapids, Lansing, Flint or one of the other income-tax cities, you may file a city return as well as a state return, which surprises many newcomers. This page explains the main Michigan rules for residents, commuters, business owners and employers. We help Michigan clients remotely from our Naperville, Illinois office.

Individual income tax

Michigan's individual income tax rate is 4.25 percent. The Department of Treasury's withholding guidance for retirees confirms that payers withhold at 4.25 percent on all taxable pension distributions for recipients born in 1946 or later. Michigan taxes residents on all income and nonresidents on Michigan-source income, and the Department publishes guidance to help determine whether you are required to file, plus a Resident and Non/Resident Income FAQ. Retirement income rules in Michigan depend on the recipient's birth year, so retirees should check the current year's subtraction rules rather than assume a single treatment.

One compliance point for 2026: the Department issued a notice on February 25, 2026 on decoupling Michigan income taxes from certain Internal Revenue Code provisions. In other words, a number that comes straight off the federal return may need adjusting on the Michigan return. If you have new federal deductions or credits for 2025 or 2026, ask whether Michigan follows them.

Michigan borders Indiana, Ohio and Wisconsin and is close to Illinois, so commuting is common. Indiana's Department of Revenue, for example, lists Michigan among the states whose residents file only in their home state on Indiana wages. See our multi-state tax service and our page on Indiana.

City income taxes

Michigan has more city income taxes than almost any state. The Department of Treasury says that twenty-four Michigan cities levy municipal taxes related to income, which can include individual income tax, withholding, corporate income tax and partnership tax. The Treasury Department administers Detroit's taxes, processing City of Detroit business, fiduciary and individual income tax returns since the 2015 tax year, and it will begin processing City of Flint individual, business and fiduciary returns on January 1, 2027, covering 2026 and later tax years.

The other cities administer their own taxes, forms and payment rules: Albion, Battle Creek, Benton Harbor, Big Rapids, East Lansing, Grand Rapids, Grayling, Hamtramck, Highland Park, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Saginaw, Springfield and Walker. Rates, resident versus nonresident treatment and filing rules differ by city, so an employee who lives in one city and works in another can owe tax to both, with possible credits. Employers should check city withholding obligations for every work location. See local payroll taxes by city and county and our Detroit metro page.

Business taxes

The Michigan Corporate Income Tax (CIT), signed into law in 2011, imposes a 6 percent tax on C corporations and taxpayers taxed as corporations federally. Treasury lists one credit, a small business alternative credit that offers an alternate rate of 1.8 percent of adjusted business income, with no other credits except those carried under the earlier Michigan Business Tax.

For partnerships and S corporations, the Flow-Through Entity (FTE) tax is Michigan's entity-level option. Treasury notes that beginning with 2025 returns, members, not the entity, must report FTE credit information on Form 6072 with their MI-1040 or MI-1041, or the credits will be denied. Estimated FTE payments are due quarterly and must be made online through Michigan Treasury Online. It is one way to respond to the federal state and local tax deduction limit; see SALT deduction and property taxes.

Sales and use tax

Individuals or businesses selling tangible personal property to the final consumer remit 6 percent sales tax on the total price of taxable retail sales. Sales of electricity, natural or artificial gas and home heating fuels for residential use are taxed at 4 percent. Use tax is also 6 percent on taxable items brought into Michigan or bought from out-of-state retailers that do not collect tax, and credit is given for tax paid to another state. Treasury states that Michigan does not allow city or local units to impose sales tax, so the rate is the same in every city. See our sales tax service and sales tax nexus.

Payroll in Michigan

• State withholding: employers withhold Michigan income tax and use the withholding guidance and forms posted by Treasury. See state income tax withholding.
• City withholding: required if the employer has employees who work in, or live in, an income-tax city. Check Detroit's employer withholding tax requirements and each other city's rules.
• Unemployment insurance: run by the Unemployment Insurance Agency in the Department of Labor and Economic Opportunity; employers register and file through the agency's MiUI for Tax portal, and the wage base and rates are announced there. See state unemployment insurance.

Counties and property tax

Property tax in Michigan is administered locally through cities, townships and counties, with Treasury overseeing state programs and exemptions, including community development and personal property tax exemptions. Michigan has no county or city sales tax, so local government revenue comes mostly from property tax and, in the 24 cities, income tax. Chicago-area residents who own a lake house or rental in Michigan should expect a Michigan nonresident filing obligation on Michigan-source income. For regional context, see our Illinois page.

How we can help

We prepare Michigan resident, part-year and nonresident returns, coordinate city income tax filings, evaluate the Flow-Through Entity tax, and set up payroll with the right city accounts. For a notice from Treasury or a city tax office, see state tax notices and representation. Contact us to begin; this page is general information.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.