Updated October 16, 2026. Quick answer: Michigan’s retirement subtraction is keyed to the year of birth of the filer, and the only survivor wording in the documents read is for a surviving spouse, so they do not say whether a non-spouse beneficiary of an inherited IRA qualifies.
Michigan at a glance
| Item | What the documents say |
|---|---|
| How the state taxes retirement-account income | Taxed as income, with a retirement and pension benefits subtraction tied to the filer’s birth year |
| Do the state’s documents address beneficiaries? | Only a surviving spouse is addressed: benefits qualify if the decedent qualified at death and was born before January 1, 1953, and a qualifying surviving spouse may instead use the older spouse’s birth year |
| Retirement exclusion or credit | Birth-year tiers; IRAs qualify after age 59 1/2; the phase-in subtraction is up to 100% for 2026 |
| Rate in the documents read | 4.25% for tax year 2025 |
| State inheritance or estate tax | Not mentioned in the documents read |
| Changed for 2026? | The Treasury retirement page shows the phase-in subtraction up to 100% for 2026 and beyond |
What the Michigan documents say
The Form 4884 instructions say the retirement and pension benefits that can be subtracted include “defined benefit pensions, IRA distributions, and most payments from defined contribution plans”. For IRAs they set an age test: “IRAs after age 59½ or described by Section 72(t)(2)(A)(iv) of the IRC”.
On survivors the instructions say benefits received as a surviving spouse can qualify “if the decedent qualified for the subtraction at the time of death and was born prior to January 1, 1953”, with exceptions explained on page 20. There a qualifying surviving spouse is “an individual that claimed a subtraction for retirement or Social Security benefits on a return jointly filed with the decedent in the year the spouse died, and the surviving spouse has not remarried”, who may claim the subtraction that would have applied “based on the year of birth of the older of the surviving spouse or the deceased spouse”. A surviving spouse who did not claim that subtraction on the joint return, or who has remarried, uses the birth year of the filer (or of the older spouse, if remarried). They do not describe a non-spouse beneficiary.
The MI-1040 instructions print the rate: “For tax year 2025, the Michigan income tax rate is 4.25%”.
The federal 10-year rule and your Michigan tax year
IRS Publication 590-B says a beneficiary may be required to take the entire account balance by the “end of the 10th year following the year of the owner’s death”, with exceptions for certain beneficiaries. Because the balance generally has to come out within that window, the timing of each withdrawal decides which tax year it lands in. See the 10-year rule and annual RMDs, lump sum versus spreading withdrawals and inherited IRA rules.
Withholding and other state taxes
Whether a state withholds from a withdrawal is a separate rule: see state withholding on retirement withdrawals. For Michigan’s own death taxes, see Michigan inheritance tax.
What the documents do not say
- The documents read do not mention a non-spouse beneficiary or an inherited IRA.
- The tiers are keyed to the year of birth of the filer, so which tier would apply to a beneficiary’s withdrawal is not stated.
- They do not mention income in respect of a decedent or a deduction for estate tax paid on an inherited amount.
Common mistakes
- Assuming Michigan’s rule for your own retirement income also covers an account you inherited: read whether its documents address beneficiaries, and confirm the point with a Michigan preparer.
Related: state tax on inherited IRA withdrawals, state by state, whether Michigan taxes 401(k) and IRA withdrawals, Michigan retirement taxes, Michigan inheritance tax, inherited IRA rules, spouse versus non-spouse beneficiary 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 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs): https://www.irs.gov/pub/irs-pdf/p590b.pdf
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.