Updated October 4, 2026. Quick answer: Yes. Michigan taxes capital gains in federal adjusted gross income at its flat rate: “The income tax rate for 2025 is 4.25 percent”. The booklet also describes a capped deduction for senior citizens born before 1946.
Selling your home? How the state taxes the profit, from its own tax documents: Does Michigan tax the profit from selling your home?.
The same question for dividends and interest: does Michigan tax dividends and interest.
How Michigan treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Taxed as ordinary income at the flat rate; no lower rate for long-term gains |
| 2025 rate | 4.25 percent |
| 2026 rate | 4.25%, used in the 2026 estimated-tax worksheet |
| Deduction for those born before 1946 | “deduction is limited to a maximum of $14,688 for single filers” and $29,376 for joint filers in 2025 |
A $50,000 long-term gain
A $50,000 long-term gain adds $50,000 x 4.25% = $2,125 of Michigan tax, before any other income or deduction. The 2026 estimated-tax worksheet says “Multiply line 3 by 4.25% (0.0425)”.
What changes in 2026
The 2026 estimated-tax worksheet uses the same 4.25% rate.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether Michigan taxes pensions, how Michigan taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
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Answer againSources
- 2025 Michigan Individual Income Tax Return Booklet (MI-1040 Book): https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf
- MI-1040ES 2026 Individual Estimated Income Tax Voucher and Worksheet: https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040ES-(2026).pdf
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.