How Much Tax Does Michigan Take Out of Paychecks?

Understanding how much tax Michigan takes out of paychecks involves navigating both state and, potentially, local income taxes. Paychecks in Michigan are subject to various deductions, including federal income tax, Social Security, and Medicare, in addition to Michigan-specific taxes.

Michigan State Income Tax Withholding

Michigan imposes a flat income tax rate that applies to all taxable income earned by residents and income earned from Michigan sources by non-residents. For the 2024 tax year, the state income tax rate is 4.25 percent.

Taxable income for state purposes generally begins with an individual’s adjusted gross income (AGI) as determined on federal income tax forms. For 2024, a personal exemption of $5,600 is available for each taxpayer and dependent.

The state also provides certain deductions that can reduce the amount of income subject to tax. For example, some retirement and pension benefits may be deductible. Social Security benefits are not taxed by Michigan. Employers are required to withhold this state income tax from employee paychecks based on the information provided by the employee on their Michigan Withholding Exemption Certificate (Form MI-W4).

Michigan City Income Tax Withholding

Beyond the state income tax, some cities in Michigan also levy their own income taxes. Unlike the flat state income tax that applies statewide, not all cities in Michigan have a local income tax. Currently, 24 cities in Michigan impose income taxes on individuals.

Prominent Michigan cities that impose income taxes include Detroit, Grand Rapids, Lansing, and Flint. These city income tax rates often differ for residents versus non-residents who work within the city limits. For example, Detroit’s resident income tax rate is 2.4%, while non-residents pay 1.2%.

City income taxes are typically calculated as a flat percentage of gross wages. Non-residents are generally taxed only on income earned within the city limits. This city income tax is an additional tax deducted from paychecks, distinct from the Michigan state income tax, and is intended to fund local government operations.

Factors Influencing Your Michigan Withholding

The amount of Michigan state and city tax withheld from a paycheck can be influenced by an individual’s choices on specific tax forms. The Michigan Withholding Exemption Certificate (Form MI-W4) is the primary document used to inform an employer how much state income tax to withhold. Similarly, some cities may have their own forms or processes for adjusting local withholding.

These choices include the filing status selected, such as single or married, and the number of allowances claimed. Claiming more allowances generally results in less tax withheld per pay period, while claiming fewer allowances or requesting an additional withholding amount leads to more tax being deducted. An employee can also designate an additional dollar amount to be withheld from each pay if they anticipate owing more tax than the standard withholding calculations would cover.

The purpose of adjusting withholding is to align the amount withheld with an individual’s actual tax liability for the year. Properly adjusted withholding can help avoid a large tax bill at year-end or an excessive tax refund. Employees are required to submit an MI-W4 to their employer, and if they fail to do so, the employer must withhold tax without any allowance for exemptions, resulting in a higher amount withheld.

Understanding Michigan Tax Deductions on Your Pay Stub

Locating and understanding Michigan-specific tax deductions on a pay stub is straightforward once familiar with common labels and their meanings. Pay stubs typically provide a breakdown of gross pay, various deductions, and net pay. The gross pay represents the total earnings before any taxes or other deductions are subtracted.

For Michigan state income tax, common abbreviations or labels on a pay stub include “MI WH,” “MI State Tax,” or “MWT.” City income taxes, if applicable, will also appear as separate line items, often abbreviated to indicate the specific city, such as “DET City Tax” for Detroit. Some pay stubs may simply list “Local Tax” or use a two-letter city code followed by “R” for resident or “N” for non-resident.

To verify accuracy, an individual can cross-reference the amounts withheld against the state and city tax rates discussed previously. Pay stubs usually show both current period deductions and year-to-date (YTD) totals for each tax type. The YTD figures represent the cumulative amounts withheld since the beginning of the calendar or fiscal year.