Updated October 5, 2026. Quick answer: Yes, with a break. Michigan taxes annuity income at a flat rate. The booklet says “The income tax rate for 2025 is 4.25 percent.” It also allows a retirement and pension subtraction by birth year, and the booklet lists “Retirement annuity policies paid to a senior citizen (age 65 or older)” for life among the qualifying benefits.
State retirement-income forms, line by line: Michigan Form 4884.
How Michigan treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed at the flat rate; a retirement and pension subtraction applies to qualifying benefits |
| 2025 rate | 4.25 percent |
| 2025 subtraction, born before 1946 | Up to $65,897 single or $131,794 joint for private benefits |
| 2025 subtraction, born 1946 through 1966 (75% phase-in) | Up to $49,423 single or $98,846 joint (75% of the $65,897 and $131,794 limits, rounded to the dollar) |
| Phase-in schedule | “2026 (and beyond) N/A up to 100%” |
| Where annuities go | “Enter all annuity, retirement, pension and individual retirement account (IRA) benefits” |
A $24,000 example
A stream of $24,000 in annuity payments, with no subtraction, adds $24,000 x 4.25% = $1,020 of Michigan tax.
A single filer born from 1946 through 1966 with qualifying benefits is under the 2025 cap of $49,423, so $24,000 of qualifying benefits fits inside it; whether a given annuity qualifies is decided by the booklet’s list.
What changes in 2026
The Treasury page’s phase-in table prints up to 100% for tax year 2026 and beyond, up from up to 75% for 2025.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Michigan taxes pensions, how Michigan taxes retirement income, annuity income tax by state, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- Retirement and Pension Benefits (Michigan Department of Treasury): https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits
- 2025 MI-1040 Michigan Individual Income Tax Return Instructions Booklet (Michigan Department of Treasury): https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf
Sources: the primary documents linked above, read on October 5, 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.