What Percent of Taxes Are Taken Out of a Paycheck in Michigan?

Several deductions are made from an employee’s gross earnings before they receive their take-home pay, or net pay. Calculating a single percentage for these deductions is complex due to different tax types, progressive rates, and individual financial factors. These withholdings contribute to federal, state, and sometimes local government programs and services.

Federal Payroll Tax Withholdings

Federal taxes represent a significant portion of paycheck deductions for most employees across the United States. These include Federal Insurance Contributions Act (FICA) taxes and federal income tax. FICA taxes specifically fund Social Security and Medicare programs, which provide retirement, disability, and healthcare benefits.

FICA taxes are composed of two parts: Social Security and Medicare. For Social Security, employees contribute 6.2% of their gross wages, up to an annual wage base limit. For 2025, this limit is set at $176,100, meaning any earnings above this amount are not subject to the Social Security tax. Medicare tax, however, applies to all earned wages without any income limit, with employees contributing 1.45% of their gross pay.

An additional Medicare tax of 0.9% may apply to higher earners. This extra tax is levied on wages exceeding certain thresholds: $200,000 for single individuals, $250,000 for married couples filing jointly, and $125,000 for those married filing separately. Employers are responsible for withholding this additional tax once an employee’s wages surpass the $200,000 threshold in a calendar year, regardless of the employee’s filing status.

Federal income tax withholding is another substantial deduction. It operates under a progressive tax system, meaning higher income levels are subject to higher tax rates. The amount of federal income tax withheld from a paycheck depends on an employee’s gross income, their filing status, and the information they provide on Form W-4, Employee’s Withholding Certificate. Form W-4 allows employees to adjust their withholding to reflect their tax liability, considering factors like dependents and other income. Employers use W-4 information to estimate the appropriate federal income tax deduction.

Michigan State Income Tax Withholding

Beyond federal obligations, residents of Michigan also have state income tax withheld from their paychecks. Michigan employs a flat income tax system, which means a single tax rate applies to all taxable income, regardless of the amount earned. For the 2025 tax year, Michigan’s individual income tax rate is 4.25%.

Taxable income for state purposes generally begins with federal adjusted gross income (AGI), from which state-specific adjustments are made. These can include various subtractions, exemptions, and credits. For instance, Michigan allows taxpayers to claim a personal exemption, which was $5,600 for the 2024 tax year, and additional exemptions may be available for dependents or specific circumstances. These adjustments reduce the portion of income subject to the 4.25% flat tax rate.

The Michigan Department of Treasury oversees the administration and collection of state income taxes. Employers withhold state income tax from employee wages based on the state’s tax rate and employee withholding information. While the state’s flat rate offers simplicity, understanding exemptions and credits is important for accurate tax planning.

Michigan City Income Taxes

In addition to federal and state taxes, some individuals working or residing in Michigan may also be subject to local city income taxes. Approximately 24 Michigan cities impose a local income tax. Prominent examples of cities with income taxes include Detroit, Grand Rapids, and Lansing.

These city income taxes are typically withheld by employers if an employee lives or works within a municipality that levies such a tax. The tax rates for city income taxes vary significantly by municipality and often differ based on residency. Generally, residents of a taxing city pay a higher rate than non-residents who work within that city’s limits. For example, Detroit’s city income tax rate is 2.4% for residents and 1.2% for non-residents working in the city.

Many other Michigan cities that impose an income tax typically have rates of 1% for residents and 0.5% for non-residents. Because these rates and the specific cities that impose them can change, individuals should verify the applicable rates for their particular municipality of residence and place of employment.