Updated October 5, 2026. Quick answer: Yes. Michigan taxes interest and dividends at a flat rate: “the Michigan income tax rate is 4.25%” for 2025. “Senior citizens born prior to 1946 may be able to deduct part” of them.
How Michigan treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed at the flat rate |
| 2025 rate | 4.25% |
| Other states’ bonds | Residents add interest, dividends and income from obligations of states “other than Michigan” |
| Born before 1946 | Interest, dividends and capital gains can be subtracted, “limited to a maximum of $14,688 on a single” return and $29,376 on a joint return for 2025 |
A $20,000 example
Dividends and interest of $20,000 with no subtraction add $20,000 x 4.25% = $850 of Michigan tax.
A single filer born before 1946 who subtracts the full $14,688 leaves $5,312 of this income to tax, before the other deductions the booklet may reduce the subtraction by.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Michigan taxes capital gains, whether Michigan taxes pensions, how Michigan taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Michigan Individual Income Tax Return Booklet (MI-1040): 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.