Michigan Retirement Taxes 2026: Pension Deduction Restored

How Michigan taxes retirement income in 2026 (statute-cited)

What changed — the PA 4 of 2023 phase-in, by the numbers

What settling an estate costs in Michigan

The verdict, honestly

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2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.

Updated July 24, 2026. Quick answer: as of 2026, yes for most retirees — and this is the first year the full answer is true. Tax year 2026 completes the four-year phase-in of PA 4 of 2023 (HB 4001): all Michigan taxpayers, regardless of birth year, may deduct retirement and pension income — qualifying pension, 401(k) and IRA distributions, up to approximately $67,610 single / $135,220 joint (indexed annually; Treasury publishes final amounts). Social Security was never taxed. Guides still showing birth-year tiers or 2025’s 75% limitation are out of date.

More on public pension systems, topic by topic: Michigan MPSERS post-retirement increases, Michigan MPSERS working after retirement and Michigan MPSERS disability retirement.

State retirement-income forms, line by line: Michigan Form 4884.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Michigan tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Michigan tax 403(b) and 457(b) withdrawals.

Drawing a pension? Whether the state withholds tax from it, from its own documents: Michigan tax withholding on pension payments.

Before the tax question, the Municipal Employees’ Retirement System of Michigan options, refund and DROP rules, from the system’s own documents: Michigan MERS retirement decisions.

Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is Michigan a community property state?.

Selling your home? How the state taxes the profit, from its own tax documents: Does Michigan tax the profit from selling your home?.

Before the tax question, the Detroit Police and Fire Retirement System options, DROP and survivor rules, from the system’s own documents: Detroit police and fire retirement decisions.

The state’s income tax schedule: the Michigan 2026 tax brackets (pending).

Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Michigan tax withholding on IRA and 401(k) withdrawals.

Taking money out of your TSP? How the state taxes it, from its own tax documents: Does Michigan tax TSP withdrawals?.

For a pension earned elsewhere or paid after you move: does Michigan tax out-of-state pensions.

Before the tax question, the Detroit General Retirement System options and refund rules, from its own pages: Detroit GRS retirement decisions.

For trust income specifically: does Michigan tax trust income.

Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Michigan have an inheritance tax?.

For dividends and interest specifically: does Michigan tax dividends and interest.

For annuity payments specifically: does Michigan tax annuity income.

Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does Michigan have an estate tax?.

For military retired pay: does Michigan tax military retirement.

Saving for a child’s college? The state’s 529 break has its own page: Michigan 529 plan tax deduction.

For the sale of stocks, funds or real estate: does Michigan tax capital gains.

For 401(k) and IRA withdrawals specifically: does Michigan tax 401(k) and IRA withdrawals.

Before the tax question, the Michigan MPSERS survivor options, early reduced and equated pensions and refund repayment rules: Michigan MPSERS retirement decisions.

More on Michigan: Does Michigan Tax Roth Conversions? 2026, Michigan LLC Annual Report and Medicaid Home Equity Limit in Michigan.

How Michigan taxes retirement income in 2026 (statute-cited)

Income tax rate	Flat 4.25%
Social Security	Not taxed (fully deducted)
Pension / 401(k) / IRA	Deductible up to ≈$67,610 single / $135,220 joint for TY2026, all taxpayers, for qualifying benefits only: IRA distributions qualify only if taken at age 59 1/2 or later (with limited exceptions such as death and disability), 401(k) distributions only to the extent attributable to employee contributions mandated by the plan or to employer contributions, and the maximum is reduced by any military, railroad retirement or Michigan National Guard deduction (MCL 206.30(1)(f)(iv), (8); PA 4 of 2023; Treasury RAB 2026-1)
Military / railroad / National Guard pensions	Fully exempt, no cap (MCL 206.30(1)(e)). Retirees of public police and fire departments under 1969 PA 312, state police troopers and sergeants, and county jail corrections officers may elect to deduct public pension benefits without the additional limits (MCL 206.30(11))
Estate / inheritance tax	None

What changed — the PA 4 of 2023 phase-in, by the numbers

Tax year	Deduction limitation	Cap (single / joint)
2025	75% of the Tier-1 cap	$49,423 / $98,846
2026	100% — fully restored	≈$67,610 / $135,220 (indexed; Treasury final)

Worked example — $60,000 of pension income: in 2025, the 75% cap left $10,577 taxable ≈ $450 of Michigan tax; in 2026, the full deduction covers it: $0. Bonus for TY2026–2028: PA 24 of 2025 lets taxpayers born after 1952, age 67+, claim both the standard deduction and the Social Security deduction.

What settling an estate costs in Michigan

No estate or inheritance tax, and no statutory fee percentage — personal representative and attorney compensation must be reasonable (MCL 700.3719). But Michigan is unusual in levying a value-scaled probate court inventory fee on every estate opened for probate (MCL 600.871 — e.g., $68.75 + 0.5% of the amount over $10,000 for estates between $10k and $25k, continuing to scale with estate value), plus $150 to open proceedings (MCL 600.880(1)). Small estates: $53,000 for deaths in 2026 (indexed annually per MCL 700.1210; base raised $15,000 → $50,000 by 2024 legislation) via petition/assignment under MCL 700.3982 or transfer-by-affidavit under MCL 700.3983. Context: probate cost by state · small-estate limits by state · will vs. trust calculator.

What the tax picture means for your own accounts

A state guide can set out how the rules treat retirement income in general, but not how they land on your particular mix of pensions, withdrawals and savings, and an adviser can work that through with you.

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The verdict, honestly

On retirement-income taxes, 2026 Michigan is genuinely competitive: a typical retiree drawing $60k–$100k (joint) from pensions and retirement accounts plus Social Security pays little or nothing. It doesn’t match the zero-income-tax states for very large withdrawals above the caps, and unlike them the deduction depends on a statute that phased in over four political years. No tax at death is a real advantage over inheritance-tax states like Pennsylvania. Snowbirds comparing a Florida domicile switch should weigh the full picture below.

Michigan is one of 43 jurisdictions that do not tax Social Security at any income level in 2026. The other 8 exempt benefits only up to an income or age limit. Full rules and statutes: the 51-state table.

Michigan vs. common alternatives

State	Social Security	Pension / 401(k) / IRA	Estate tax	Inheritance tax
Michigan	Not taxed	Deductible up to ~$67,610/person (2026)	None	None
Ohio	Not taxed	Taxable; modest credits	None (repealed 2013)	None
Indiana	Not taxed	Fully taxable (state + county)	None	None (repealed 2012)
Wisconsin	Not taxed	Exclude up to $24,000/person at 67+ (2025 Act 15)	None	None
Florida	Not taxed	Not taxed (no income tax)	None	None

Comparison rows summarize each state’s general rules; see our 51-state retirement tax table for statute-cited detail on every state.

Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and Michigan may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.

Finding a financial advisor in Michigan

Per the SEC’s July 2026 Investment Adviser roster, Michigan is home to 298 SEC-registered advisory firms (#14 nationally) managing $562.8 billion in regulatory assets (#24 by AUM). Median firm size is $372,819,349. Full breakdown: Michigan advisor statistics.

A move between states is exactly when fee structures and state tax rules deserve a second look — see our advisor cost guide and fee-drag calculator.

Thinking about moving?

Four taxes change when you move state in retirement, not one: income tax on withdrawals, state estate tax, state inheritance tax, and what probate costs your heirs. Corridor comparisons involving Michigan:

Leaving Michigan? See leaving Michigan in retirement.

Compare any two states with the retirement tax comparison tool, or browse all corridors at the relocation hub.

What probate costs in Michigan

Michigan sets probate compensation by a “reasonable fee” standard with no percentage schedule, so anyone quoting a firm figure is estimating. Its small-estate route of $53,000 reaches real property only where the conditions of MCL 700.3982 are met — subsection (5) counts real property inside the gross estate and directs how to value it when it is mortgaged, so the route contemplates a house even though the section stops short of saying so in terms. Full detail with the governing statute, the court filing fee and the threshold: Michigan probate cost. To price a specific estate, use the probate cost calculator.

Cite or share this guide

Suggested citation: Clear Money Guide, “Michigan Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/michigan-retirement-taxes/. Free to cite with attribution and a link. Statutes and official sources are linked throughout; data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.

Figures verified against MCL 206.30, 206.51, 600.871, 600.880 and 700.1210, Michigan Treasury Revenue Administrative Bulletin 2026-1, the Treasury retirement and pension benefits pages and the January 30, 2026 cost-of-living notice on September 30, 2026; the 2026 indexed retirement cap of about $67,610 single and $135,220 joint, the Social Security treatment, MCL 700.3982(5), the neighbor-state comparison rows, the SEC adviser roster figures and the 51-state Social Security counts were not re-checked.

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Is Michigan a Good State to Retire In? 2026 Taxes, Estate and Probate Data

What this state guide covers