Updated October 7, 2026. Quick answer: Only if you live there. The Schedule NR instructions for pensions and IRA distributions say to “Enter the income received while a Michigan” resident, and the nonresident list of taxable Michigan income in the MI-1040 instructions names wages, rents, royalties, gains, and business income but not pensions.
How Michigan treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | The MI-1040 instructions list the types of income a nonresident must report to Michigan: wages for work performed in Michigan, net rents and royalties and capital gains on Michigan property, Michigan business income, and certain winnings. Pensions and retirement distributions are not on that list, and the Schedule NR line for pensions counts only income received while a Michigan resident. A nonresident who retired from a Michigan employer is therefore not listed as owing Michigan tax on the pension. |
| Residents with a pension earned elsewhere | Michigan taxes a resident on income from all sources, including income earned in another state, with a credit for tax paid to a nonreciprocal state. Retirement and pension benefits included in AGI may be deductible, and the amount depends on year of birth and filing status. Taxpayers born before 1946 may subtract all qualifying federal or Michigan public retirement benefits plus private benefits up to $65,897 single or $131,794 joint, and those born from January 2, 1959 through December 31, 1966 may subtract qualifying retirement benefits up to $49,423 single or $98,846 joint. The instructions send filers to Form 4884 for the full set of birth-year rules. |
| Part-year residents (year of a move) | A person who moves a permanent home into or out of Michigan owes Michigan tax on income earned, received, or accrued while living in Michigan, and allocates income from the date of the move on Schedule NR. Form 1099-R deferred compensation is allocated to the state of residence when received. Schedule NR line 10 takes pensions and IRA distributions received while a Michigan resident. |
| Rate | Michigan prints a single flat rate for 2025. The source says: “The income tax rate for 2025 is 4.25 percent.” The 2025 personal exemption allowance is $5,800. |
| Return to file | Residents file Form MI-1040. Nonresidents and part-year residents file Form MI-1040 with the Nonresident and Part-Year Resident Schedule, Schedule NR. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as a Michigan resident, and $20,000 after leaving.
The first $20,000 can be taxed by Michigan; the rest is outside its reach under the federal rule below. At the 4.25% rate printed for 2025, the tax on it is computed as $20,000 x 0.0425 = $850, before any exclusion or credit. Federal tax still applies.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means certain plan payments made as a “series of substantially equal periodic payments”, so not every payment is covered.
Related: how Michigan taxes retirement income, whether Michigan taxes pensions, Michigan to Arizona retirement taxes, Michigan to Florida retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 MI-1040 Individual Income Tax Forms and Instructions (Michigan Department of Treasury): https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040-Book.pdf
- 2025 Schedule NR, Nonresident and Part-Year Resident Schedule (Michigan Department of Treasury): https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/Schedule-NR.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.