Updated October 4, 2026. Quick answer: Yes, with a phase-in subtraction. Michigan taxes 401(k) and IRA withdrawals that are in income, but a resident born between January 2, 1959 and December 31, 1966 may subtract qualifying retirement benefits. The instructions say recipients “may subtract qualifying retirement benefits up to $49,423 if single”.
State retirement-income forms, line by line: Michigan Form 4884.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Michigan tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Michigan tax 403(b) and 457(b) withdrawals.
Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Michigan tax withholding on IRA and 401(k) withdrawals.
Taking money out of your TSP? How the state taxes it, from its own tax documents: Does Michigan tax TSP withdrawals?.
Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Michigan have an inheritance tax?.
What Michigan does with 401(k) and IRA withdrawals
Treasury’s page describes covered income as “IRA distributions, and most payments from defined contribution plans”. On the rate, the booklet says “The income tax rate for 2025 is 4.25 percent”.
| Item | What the documents say |
|---|---|
| Treatment | Taxable, with a subtraction keyed to birth year |
| Subtraction | Up to $49,423 single or $98,846 joint on the 2025 return, for qualifying benefits only |
| State rate | 4.25% for 2025 |
| Source | Michigan Department of Treasury, 2025 instructions, MI-1040 booklet and retirement benefits page |
A $40,000 withdrawal
If all of a $40,000 withdrawal is a qualifying benefit, it is below the 2025 single-filer cap of $49,423. That is a comparison with the cap, not a tax result: only the employer-funded part of a 401(k) and the age-qualified part of an IRA count, and the rest stays taxable at 4.25%.
Conditions that decide the answer
- The subtraction depends on birth year: recipients born January 2, 1959 through December 31, 1966 get the capped subtraction.
- Recipients born January 1, 1953 through January 1, 1959 qualify for a subtraction or a Tier 3 standard deduction instead.
- Only qualifying benefits count, and the cap is $98,846 on a joint return.
What changes in 2026
Treasury’s page says the subtraction rises from up to 75% (2025) to up to 100% for 2026 and after. The 2026 dollar limit is not printed in the documents read here.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on these withdrawals in Publication 590-B, Distributions from Individual Retirement Arrangements and Publication 575, Pension and Annuity Income.
Related: whether Michigan taxes pensions, how Michigan taxes retirement income, whether Michigan taxes Roth conversions, and the state-by-state table of 401(k) and IRA withdrawal tax.
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Answer againSources
- 2025 MICHIGAN Individual Income Tax MI-1040 Instructions (Form 4884 Retirement and Pension Schedule instructions): https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/4884-Instr.pdf
- MI-1040 Individual Income Tax Forms and Instructions 2025: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf
- Retirement and Pension Benefits: https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.