How Much Tax Is Deducted From a Paycheck in Michigan?

Your paycheck includes various mandatory deductions that reduce your take-home pay. Understanding these deductions helps clarify why your net pay differs from your gross salary. This article explains the types of taxes withheld from paychecks, focusing on Michigan residents.

Federal Withholding and Payroll Taxes

A significant portion of paycheck deductions goes towards federal taxes. Federal income tax withholding is an estimated amount of your annual federal income tax liability. Employers calculate this based on information employees provide.

Beyond income tax, employees contribute to Federal Insurance Contributions Act (FICA) taxes, which fund Social Security and Medicare. For 2025, the Social Security tax rate for employees is 6.2% on earnings up to an annual wage base limit. Medicare tax is withheld at a rate of 1.45% from all earned wages, with no wage base limit.

These FICA contributions are mandatory deductions from your gross pay. Employers also contribute an equal amount to FICA taxes on behalf of their employees. The total FICA tax rate for employees is 7.65%, comprising 6.2% for Social Security and 1.45% for Medicare.

Michigan State Income Tax Withholding

Michigan residents have a state income tax withheld from their paychecks, in addition to federal taxes. Michigan imposes a flat state income tax rate on taxable income for all residents, meaning everyone pays the same percentage.

The Michigan state income tax rate for 2024 is 4.25%. Employers are responsible for withholding this tax from employee wages and remitting it to the state. Individuals may claim personal exemptions on their state income tax returns, which reduce their taxable income.

For 2024, the personal exemption amount is $5,600 per person. This exemption helps lower the income amount subject to the 4.25% state tax. The state income tax withholding process is separate from federal income tax withholding.

Local Income Taxes in Michigan

Many Michigan cities levy their own local income taxes, separate from state and federal income taxes. These city taxes add another layer of deductions.

Cities such as Detroit, Grand Rapids, Lansing, and Flint have local income taxes. Rates vary considerably, with resident rates ranging from 1% to 2.4% and non-resident rates typically half of the resident rate.

Employers in these taxing cities must withhold applicable local income tax from employee paychecks. This applies to both city residents and non-residents working in the city. The amount withheld depends on the city’s tax rate and the employee’s residency status.

Factors Affecting Your Tax Deductions

Personal circumstances and choices influence the amount of federal, state, and local taxes withheld from your paycheck. Form W-4, Employee’s Withholding Certificate, is the primary document for federal income tax withholding. Employees complete this form to inform their employer how much federal income tax to withhold.

On Form W-4, individuals indicate their filing status, dependents, other income, itemized deductions, or additional tax credits. Electing to have more tax withheld will increase paycheck deductions. Conversely, claiming more allowances or credits can reduce the amount withheld.

Michigan generally uses federal Form W-4 information for state income tax withholding. Some employers might use a Michigan-specific form to fine-tune state withholding. Higher gross pay naturally leads to larger tax amounts withheld, even with flat tax rates, because the tax is a percentage of a larger base.

Pre-tax deductions reduce your taxable income. Contributions to retirement accounts (e.g., 401(k), 403(b)) and certain health insurance premiums are often pre-tax. These amounts are subtracted from gross pay before income taxes are calculated, lowering income subject to federal and state withholding. These deductions do not reduce income subject to FICA taxes.

Reviewing Your Pay Stub

Regularly reviewing your pay stub helps ensure the accuracy of your tax deductions. A typical pay stub outlines your gross pay and displays your net pay.

The deductions section itemizes federal income tax (FIT or Federal Tax), Social Security (SS or OASDI), and Medicare (MED or HI). Michigan state income tax appears as MI State Tax or similar. Applicable local income taxes are also listed, usually identified by the city’s name, such as Detroit City Tax.

Comparing these figures against your expectations and previous pay stubs helps identify any discrepancies. Understanding each line item on your pay stub empowers you to verify that the correct amounts are being withheld according to your W-4 elections and applicable tax laws.

References

https://www.irs.gov/individuals/tax-withholding-estimator
https://www.irs.gov/newsroom/irs-announces-2025-tax-rates-standard-deductions-and-other-tax-figures
https://www.irs.gov/individuals/understanding-your-pay-statement