Does Michigan Tax Roth Conversions? 59½ Rule and Subtractions

Michigan does tax Roth conversions, at the state’s flat 4.25% rate, because the taxable portion of the conversion flows through your federal adjusted gross income into Michigan’s tax base.¹ The important qualifier is age: if you are at least 59½ when the conversion happens, Michigan’s retirement income subtraction can wipe out some or all of that state tax. If you are younger, the full converted amount is taxable at 4.25% with no subtraction available.

Why the Conversion Is Taxable in Michigan

Michigan starts with your federal AGI and then applies state-specific additions and subtractions to arrive at taxable income.² When your IRA custodian processes the conversion, it issues Form 1099-R with the taxable amount in Box 2a, and that amount becomes part of your federal AGI.³ Michigan then taxes it at a single flat rate. No separate brackets, no preferential rate for investment income.

The 2026 rate is 4.25%.⁴ So a $100,000 conversion in 2026 carries a baseline Michigan tax of $4,250 before any retirement subtraction is applied.

The 59½ Rule Decides Everything

Michigan’s retirement income subtraction only applies to a Roth conversion if you are at least 59½ years old at the time of the rollover.⁵ This mirrors the statute’s definition of “retirement or pension benefits,” which covers IRA distributions only after the participant reaches 59½.²

Convert before that birthday and the whole amount is taxed at 4.25% with no state-level relief. Convert after it and the subtraction options below become available. If you are planning a multi-year conversion strategy and will cross 59½ partway through a year, the calendar timing of each conversion matters. Federal tax applies either way; the state subtraction is what shifts.

Subtraction Options for 2026

Public Act 4 of 2023 created a new phase-in subtraction that runs alongside the older birth-year tier system. For each tax year you pick whichever method gives you the larger deduction. You cannot combine them.⁶

Three methods are available for 2026:

The phase-in subtraction, available regardless of birth year and now at 100% of the maximum amount.
The tier-based subtraction, which groups taxpayers by birth year with different limits.
The public safety retiree subtraction, an unlimited deduction for qualifying police, fire, and corrections retirees.

The phase-in option is the meaningful change for 2026. During 2023 through 2025, taxpayers born after 1952 were only eligible for a fraction of the maximum. Starting in 2026, the full amount is available to everyone, which makes the phase-in option more generous than the tier system for most people.⁶

Phase-In Subtraction Amounts

The maximum phase-in subtraction is based on private pension limits in the statute, adjusted annually for inflation using the Consumer Price Index.² The statutory base amounts are $42,240 for a single return and $84,480 for a joint return, and after years of CPI adjustments the 2026 figures are substantially higher: approximately $65,987 for single filers and $131,794 for joint filers. The Michigan Department of Treasury publishes the exact CPI-adjusted amount each year, so check the current Form 4884 instructions for the precise figure.

A $50,000 conversion on a single return could fall entirely within that limit and zero out the Michigan tax on the conversion. A $150,000 conversion on the same return would exceed the limit, leaving roughly $84,000 taxable at 4.25%.

Tier-Based Subtraction

Under the tier system, birth year sets the ceiling:

Born before 1946: retirement income can be deducted up to the full CPI-adjusted maximum, with no additional restrictions beyond the statute’s standard limits.²
Born 1946 through 1952: the retirement income subtraction is capped at $20,000 for single filers and $40,000 for joint filers. After age 67, you can instead take a $20,000/$40,000 deduction against all types of income. If your government pension was not covered by Social Security, higher limits of $35,000/$55,000 apply.²
Born after 1952: under the tier system alone, no retirement income subtraction is available until age 67, except for Social Security and certain government pensions not covered by Social Security. After 67, the $20,000/$40,000 deduction against all income becomes available.²

For most 2026 filers the phase-in method wins, but taxpayers born before 1946 with significant investment income should still run the numbers both ways. Tax software will compare them automatically.

Public Safety Retirees

Retired police officers, firefighters, Michigan State Police troopers and sergeants, and county corrections officers who meet the statutory criteria can deduct their qualifying public retirement benefits without any dollar cap, regardless of age. Any benefits claimed under this provision reduce the maximum private retirement benefits deduction otherwise available. Administrative or support personnel within a police or fire department who are not subject to compulsory arbitration laws do not qualify.⁷

Watch for City Income Tax

Twenty-four Michigan cities levy their own income tax, and a Roth conversion that increases your AGI increases city tax too. Most charge residents 1%. Detroit’s resident rate for 2026 is 2.4%.⁸ Grand Rapids, Highland Park, and Saginaw also charge above 1%.

A Detroit resident converting $100,000 would owe an additional $2,400 in city income tax on top of state and federal tax, absent any city-level offset. Factor the local rate in before you decide how much to convert in a given year.

Estimated Tax Payments

A conversion drops a lump of taxable income into your year with no state tax withheld at the source. If it produces a Michigan tax liability over $500 after withholding and credits, you are required to make estimated tax payments.⁹ Miss them and the penalty is 25% of the unpaid amount for failing to make any payment, or 10% for paying late or paying less than required.¹⁰

The 2026 quarterly due dates are April 15, June 15, and September 15 of 2026, plus January 15, 2027.⁹ A mid-year conversion shifts the schedule to reflect when the income actually hits. A conversion completed in July, for instance, means the first estimated payment is due September 15.

You can also sidestep the underpayment penalty if your 2026 withholding covers at least 100% of your 2025 tax liability, or 110% if your 2025 AGI exceeded $150,000.⁹ Some taxpayers ask the custodian to withhold Michigan tax from the conversion itself, though that means fewer dollars actually reach the Roth.

Forms You Need To File

Claiming the subtraction takes more than the MI-1040. You will use:

Federal Form 1099-R from the custodian. Box 2a shows the taxable amount that feeds federal AGI.³
Form 4884, the Michigan Retirement and Pension Schedule. This is where you report the taxable retirement benefits, pick a subtraction method, and calculate the deduction.¹²
Michigan Schedule 1, Additions and Subtractions. The amount from Form 4884 carries here, adjusting federal AGI for Michigan.11Michigan Department of Treasury. 2025 Michigan Schedule 1 Additions and Subtractions
MI-1040, the main return, where tax is calculated at 4.25%.

Recipients born before January 1, 1967 may qualify for more than one subtraction option but can only claim one per year.¹³ Filling out the wrong section of Form 4884 is a common source of processing delays and Department of Treasury notices, so if you file on paper, work through the instructions carefully. Approved e-file software handles the comparison and routing automatically.

1
Michigan Department of Treasury. Are Conversions From a Regular IRA to a Roth IRA Subject to Michigan Individual Income Tax
2
Michigan Legislature. Michigan Compiled Laws 206.30 – Taxable Income Defined
3
Internal Revenue Service. Instructions for Forms 1099-R and 5498
4
Michigan Department of Treasury. State Individual Income Tax Rate for 2026 Tax Year Determined
5
Michigan Department of Treasury. Is a Rollover From a Regular IRA to a Roth IRA an Allowable Subtraction
6
Michigan Department of Treasury. Retirement and Pension Benefits
7
Michigan Department of Treasury. Revenue Administrative Bulletin 2026-1
8
Michigan Department of Treasury. City of Detroit Income Tax Withholding Guide 2026
9
Michigan Department of Treasury. 2026 MI-1040ES Michigan Estimated Income Tax for Individuals
10
Michigan Department of Treasury. Did You Receive a Notice for Underpayment of Estimates
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12
Michigan Department of Treasury. Form 4884 Instructions
Michigan Schedule 1, Additions and Subtractions. The amount from Form 4884 carries here, adjusting federal AGI for Michigan.11Michigan Department of Treasury. 2025 Michigan Schedule 1 Additions and Subtractions