Michigan Non-Resident Income Tax Filing Requirements

Michigan imposes an income tax on earnings generated within its borders, which means that if you are not a resident but earn income from a source in the state, you may need to file a Michigan income tax return. For state tax purposes, a non-resident is an individual who is not domiciled in Michigan and does not consider it their permanent home. These individuals are taxed only on the income they earn from Michigan-based sources. This principle applies to various forms of income, not just wages from a job.

Determining Your Filing Requirement

Whether you need to file a Michigan non-resident tax return depends on your gross income from Michigan sources. The state sets specific thresholds that trigger this filing obligation. For the 2025 tax year, the personal exemption is $5,800 per person. If your income from Michigan sources exceeds your total allowable exemption allowance, you must file a Michigan tax return.

For example, a single individual with no dependents has an exemption of $5,800 and must file if their Michigan income is greater than that amount. It is also advisable to file a Michigan return if you had Michigan income tax withheld from your pay, as this is the only way to receive a refund. If you are claimed as a dependent on someone else’s tax return, you must file if your Michigan-source income exceeds your prorated exemption allowance.

Identifying Michigan-Source Income

A key step for any non-resident is to distinguish between income that is taxable by Michigan and income that is not. Michigan only taxes non-residents on income earned from Michigan sources. This process of separating income is performed on a specific state tax form and is necessary for correctly calculating your tax liability.

Income Taxable by Michigan

For non-residents, Michigan-source income includes:

• Compensation for services performed while physically located in the state, including wages, salaries, tips, and commissions. This applies even if your employer is based elsewhere or you work remotely from within Michigan.
• Income from a business, partnership, or S corporation that operates in Michigan, which includes your distributive share of the business’s net profits.
• Rental income from real estate located in Michigan.
• Capital gains you realize from the sale of real property, such as a vacation home or rental property, located in Michigan.
• Winnings from Michigan’s lottery, as well as winnings from casinos or licensed horse tracks in the state.

Income Not Taxable by Michigan

Michigan law specifically exempts certain types of income from taxation for non-residents. Interest earned from bank accounts and dividends from stocks or mutual funds are not taxed by Michigan, regardless of the location of the bank or company. Retirement income is also not subject to Michigan tax for non-residents, including distributions from pensions, 401(k) plans, and Individual Retirement Arrangements (IRAs). The tax treatment of this income is determined by your state of residence. Capital gains from the sale of intangible property, such as stocks and bonds, are not taxable by Michigan for non-residents, unless the property has acquired a business situs in the state.

Calculating Your Michigan Tax Liability

The calculation of a non-resident’s tax liability involves separating Michigan income from total income. This is accomplished using the Michigan Nonresident and Part-Year Resident Schedule (Schedule NR), which must be filed with the main MI-1040 tax form. The purpose of Schedule NR is to determine the portion of your total income that is subject to Michigan’s flat income tax rate of 4.25% for the 2025 tax year.

You begin by reporting your total income from all sources on Schedule NR, similar to your federal return. The form requires you to allocate each type of income between Michigan and non-Michigan sources. This allocation must be done for all income types, including business income, capital gains, and rental income.

After allocating all income and applicable deductions, Schedule NR calculates an income allocation percentage by dividing your total Michigan income by your total adjusted gross income. This percentage represents the proportion of your total income that is taxable by Michigan.

The tax is first calculated on your total income on the MI-1040 form, and then this allocation percentage from Schedule NR is applied to determine your final Michigan tax liability. The form also allows for the proration of your exemption allowance, which is done by multiplying your total exemptions by the income allocation percentage. This ensures you only receive a deduction proportional to the income earned in the state.

Reciprocal Agreements and Tax Credits

Michigan has entered into reciprocal agreements with six other states: Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. These agreements are designed to prevent income from being taxed by two states. If you are a resident of one of these states and your only source of Michigan income is from wages or salaries, you are exempt from Michigan income tax on that compensation.

To claim this exemption, you should file Form MI-W4, Employee’s Michigan Withholding Exemption Certificate, with your Michigan employer. This prevents your employer from taking Michigan taxes out of your paycheck. If your employer has already withheld Michigan taxes, you must file a Michigan tax return, including Schedule NR, to receive a refund. On Schedule NR, you would report zero income from Michigan wages.

These reciprocal agreements apply only to wages, salaries, tips, and commissions. They do not apply to other types of income, such as from a business you operate in Michigan, rental income from Michigan property, or gambling winnings. If you have these other types of Michigan-source income, you are still required to file a Michigan return and pay tax on that specific income.

Filing and Paying Your Michigan Tax Return

The standard deadline for filing your Michigan income tax return and paying any tax owed is April 15. If you need more time to file, you can get an extension, but an extension to file is not an extension to pay. You must still pay any expected tax liability by the original April 15 deadline to avoid penalties and interest.

You can file your Michigan tax return electronically using approved tax software. E-filing is the fastest and most secure method, and it can lead to a quicker refund. If you prefer to file by mail, you will send your paper return to the address specified in the MI-1040 instructions.

If you have a tax liability, you have several options for payment. You can authorize an electronic funds withdrawal from your bank account when you e-file, or you can pay online using a credit or debit card through a third-party processor. You may also mail a check or money order with Form MI-1040-V, the Michigan Individual Income Tax Payment Voucher, to the Michigan Department of Treasury.