Updated September 4, 2026. Quick answer: It depends on your birth year, and 2026 is the year this stops mattering for most people. Michigan phases in a full pension exemption for everyone by tax year 2026 (2023 Public Act 4); until then, retirees choose whichever of several birth-year-tiered methods is most favorable. Military retirement pay is already fully exempt at any age.
Confidence note: high. This page is scoped to pension, IRA and 401(k) taxation specifically. For the state’s full retirement-tax picture (Social Security, tax rates, estate and probate), see how Michigan taxes retirement income generally.
How pensions and retirement-account withdrawals are taxed
| Public (state/local government) pensions | Retirees born before 1946 are fully exempt, uncapped. Later birth years use a capped standard deduction or a phase-in subtraction that reaches 100% for everyone starting tax year 2026, under 2023 Public Act 4. |
|---|---|
| Private (employer) pensions | Same birth-year tiers as public pensions; for the earliest tier, private pensions share a separate CPI-adjusted cap ($65,897 single/$131,794 joint for 2025), reduced by any public pension already claimed. |
| Federal government pensions (FERS/CSRS) | Same tiered treatment as Michigan public pensions; Michigan’s own statute annotation explicitly cites Davis v. Michigan Dept. of Treasury (1989), the case that originated in Michigan and set this parity requirement nationally. |
| Military retirement pay | Fully exempt, uncapped, at any age. |
| IRA and 401(k)/403(b) distributions | Splits by type: ordinary IRA distributions after age 59 1/2 qualify for the same birth-year-tiered treatment as pensions, but employee-directed 401(k)/403(b)/457 elective deferrals do not qualify and are fully taxable; employer-mandated or employer-contribution 401(k) amounts do qualify. |
| General retirement-income exclusion | A separate interest/dividends/capital-gains subtraction exists only for those born before 1946 ($14,688 single/$29,376 joint for 2025), reduced by any pension subtraction already claimed; this is not a general retirement-income exclusion for all filers. |
Coordinate this with your overall retirement plan
An adviser can help weigh how much of a pension or IRA withdrawal to take this year, whether a Roth conversion makes sense before or after a move, and how state tax interacts with the rest of your plan, but that does not replace the numbers in your own return.
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Social Security
Social Security is never taxed by Michigan. Social Security has its own rules in every state; see the full breakdown in how Michigan taxes retirement income generally.
Statute and sources
Governing citation: MCL 206.30, subsections (1)(e), (1)(f), (8), (9), (10), (11), as amended by 2025 Act 24 and 2026 Act 39.
- Michigan Dept. of Treasury, 2025 Tier I Retirement Guidance
- Michigan Compiled Laws 206.30
- Michigan Dept. of Treasury, military retirement FAQ
Read September 4, 2026.
Related: how Michigan taxes retirement income generally · does Michigan tax Roth conversions? · Roth conversion taxes, all 51 jurisdictions.
General information drawn from each state’s own published statutes and revenue-department guidance, not legal, tax or financial advice. Figures and exemption amounts are current as of the date in the quick answer, are set by state law, and can change by future legislation; any pending bill named on this page is not yet law. This page cannot see your own return, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.