Updated October 7, 2026. Quick answer: Yes, 4.25% by default. The Department of Treasury says that without a Form MI W-4P, pension administrators “withhold on all taxable pension distributions at 4.25%” for recipients born in 1946 or after.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Michigan tax withholding on pension payments.
Michigan withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Yes for recipients born in 1946 or after; for those born earlier, only if benefits exceed private pension limits |
| Rate or amount | 4.25% of taxable pension distributions when no MI W-4P is on file |
| How to start or stop it | Form MI W-4P, submitted to each pension or annuity administrator before distributions are paid; changeable at any time; box 1 opts out if the pension or annuity is exempt from Michigan tax |
| Direct rollover | Not stated in the documents read |
| Changed for 2026? | No change stated; the Treasury page gives the 4.25% rate for 2025 |
What the Michigan documents say
The Treasury page for retirees explains the default. In the absence of an MI W-4P, pension administrators either skip withholding for people born before 1946, unless benefits exceed private pension limits, or “withhold on all taxable pension distributions at 4.25%” for people born in 1946 or after. It adds that each administrator needs its own form.
The page for pension recipients says that “you may change your elections on the MI W-4P at any time” by sending an updated form, and that if your pension or annuity is exempt from Michigan tax, “you can opt out of Michigan withholding by checking box 1”. The administrators’ page cites “Pursuant to MCL 206.703(1)” as the basis for the duty to withhold.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you by someone born in 1946 or after, with no MI W-4P on file. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Michigan withholding at the default rate is $2,125 (computed as $50,000 times 4.25%).
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. The Michigan documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about Michigan as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The pages read do not say how a direct rollover is treated, and they state no change for 2026. The Treasury page gives the 4.25% rate for 2025.
Common mistakes
- Checking box 1 to stop withholding when the pension is taxable in Michigan; the page says box 1 is for an exempt pension or annuity.
- Filing one MI W-4P and expecting it to cover several administrators; each pension or annuity needs its own.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state withholding on retirement withdrawals, how Michigan taxes 401(k) and IRA withdrawals, Michigan retirement taxes, and retirement withholding calculator.
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Answer againSources
- Withholding for Retirees: https://www.michigan.gov/taxes/business-taxes/withholding/retirees
- Withholding for Pension Recipients: https://www.michigan.gov/taxes/iit/tax-guidance/tax-situations/retirement-and-pension-benefits/pension/withholding-for-pension-recipients
- Withholding for Pension Administrators: https://www.michigan.gov/taxes/business-taxes/withholding/withholding-for-pension-administrators
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 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.