Updated October 16, 2026. Quick answer: Michigan’s retirement subtraction covers a 403(b) attributable to employer contributions, and its instructions do not exclude a 403(b) funded only by employee contributions when a 501(c)(3) organization or a public school system bought the plan; they list 457 plans among those that do not qualify.
State retirement-income forms, line by line: Michigan Form 4884.
Michigan at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Partly; depends on the plan’s contributions and your birth year |
| Do the state’s documents name these plans? | The documents read name 403(b) plans but not 457(b) plans |
| Retirement exclusion or credit | Retirement and pension benefits subtraction (Form 4884), with tiers set by year of birth and a phase-in set by tax year |
| Public-employee pension rule | A 403(b) plan bought by a public school system or a 501(c)(3) organization is not excluded for lack of employer contributions |
| Rate in the documents read | 4.25% for tax year 2025 |
| Changed for 2026? | The Treasury phase-in table reaches up to 100% of the subtraction for tax year 2026 and beyond |
What the Michigan documents say
The Form 4884 instructions list “401(k) or 403(b) plans attributable to employer contributions” among qualifying retirement benefits, along with 403(b) contributions that result in additional employer contributions such as matching. They exclude “403(b) plans attributable to unmatched employee contributions” other than plans bought by a 501(c)(3) organization or a public school system, and they list 457 plans among those that do not qualify.
The subtraction depends on birth year, and people born after December 31, 1966 do not qualify under it. The MI-1040 instructions say “For tax year 2025, the Michigan income tax rate is 4.25%”
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The documents say “457 plans” and not “457(b)”, so the page does not extend that line to a particular 457(b) beyond what the instructions say.
- A person’s own subtraction depends on birth year and other facts in the instructions.
Common mistakes
- Assuming Michigan’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Michigan taxes 401(k) and IRA withdrawals, Michigan retirement taxes, whether Michigan taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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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
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.