Michigan does not tax Social Security benefits. The state’s flat 4.25% income tax leaves Social Security retirement, survivor, and disability payments completely alone, no matter how much you collect or how you file. Federal tax is the other half of the picture, and most Michigan retirees with income beyond Social Security still owe something to the IRS on a portion of those benefits.
The Michigan Exemption
Michigan law lets you subtract all Social Security benefits from your adjusted gross income when you calculate state taxable income. The deduction sits in MCL 206.30(1)(f)(iii) and covers Social Security benefits as defined by the federal tax code, which includes retirement, survivor, and disability payments.1Michigan Legislature. MCL – Section 206.30 – Income Tax Act of 1967 (Excerpt) Supplemental Security Income never enters federal adjusted gross income to begin with, so it never reaches the Michigan return.
There is no income cap and no phase-out. A retiree collecting $40,000 a year in Social Security gets the same full deduction as one collecting $15,000. Michigan is one of 42 states, plus Washington, D.C., that leave these benefits untouched at the state level.
Federal Tax Still Applies
The IRS taxes Social Security on a sliding scale based on what it calls combined income: your adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits.2Internal Revenue Service. Social Security Income
For single filers, heads of household, and qualifying surviving spouses:
- Combined income below $25,000: no federal tax on benefits.
- Combined income between $25,000 and $34,000: up to 50% of benefits may be taxable.
- Combined income above $34,000: up to 85% of benefits may be taxable.
For married couples filing jointly:
- Combined income below $32,000: no federal tax on benefits.
- Combined income between $32,000 and $44,000: up to 50% of benefits may be taxable.
- Combined income above $44,000: up to 85% of benefits may be taxable.
Married couples filing separately who lived together at any point during the year face the harshest treatment. Up to 85% of benefits become taxable regardless of income level.3Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable Worth thinking about before choosing that filing status.
These thresholds haven’t been adjusted for inflation since they were set in 1983 and 1993. A combined income of $34,000 was solidly middle class forty years ago; today it captures a large share of retirees with even modest pension or investment income alongside Social Security.
What You’ll See at Tax Time
Each January, the Social Security Administration mails Form SSA-1099 showing your total benefits for the prior year. Report the total on line 6a of Form 1040 and the taxable portion on line 6b. IRS Publication 915 includes worksheets to calculate the taxable amount, and most tax software handles the math automatically.4Internal Revenue Service. Publication 915, Social Security and Equivalent Railroad Retirement Benefits
How to Avoid a Surprise Federal Bill
Social Security benefits don’t come with automatic federal tax withholding. If you expect to owe, you have two options.
The simpler route is voluntary withholding through IRS Form W-4V, which you submit to the Social Security Administration. You choose one of four flat rates: 7%, 10%, 12%, or 22%. No other percentages or dollar amounts are available.5Internal Revenue Service. Form W-4V (Rev. January 2026) – Voluntary Withholding Request The 7% rate fits many retirees whose combined income just crosses into the taxable range. If your other income is substantial, 12% or 22% may be closer to right.
The alternative is quarterly estimated tax payments using Form 1040-ES. You’ll generally need these if you expect to owe $1,000 or more after withholding and credits. The IRS waives underpayment penalties if you paid at least 90% of the current year’s tax or 100% of the prior year’s tax, whichever is smaller.6Internal Revenue Service. Estimated Taxes There’s also a specific penalty waiver for taxpayers who retired after age 62 or became disabled during the year, as long as the underpayment resulted from reasonable cause.
Other Retirement Income Michigan Doesn’t Tax
Social Security isn’t the only retirement income Michigan leaves alone. Two other categories are worth knowing about because they change the total picture for many retirees.
Military retirement pay is fully deductible from Michigan adjusted gross income under MCL 206.30(1)(e)(i), with no dollar cap.1Michigan Legislature. MCL – Section 206.30 – Income Tax Act of 1967 (Excerpt) Railroad retirement benefits are also excluded, both because federal law prohibits states from taxing them and because Michigan’s Income Tax Act separately exempts them under MCL 206.30(1)(e)(ii).7State of Michigan. RAB 2016-13 Railroad Employee Benefits
A retired veteran in Michigan receiving $30,000 in Social Security, $25,000 from a military pension, and $15,000 from a 401(k) owes zero Michigan tax on the first two. Only the 401(k) distribution enters the state calculation, and even that typically falls within the pension deduction limits described below.
How Pensions and Other Retirement Accounts Are Treated
Michigan used to tax pensions on a three-tier system tied to your birth year, which produced very different bills for neighbors the same age. House Bill 4001, signed as Public Act 4 of 2023, phases out that system over four years.8Michigan Legislature. Enrolled House Bill No. 4001 Starting with the 2026 tax year, the birth-year restrictions disappear entirely, and every Michigan taxpayer can deduct combined public and private retirement benefits up to an inflation-adjusted cap.9State of Michigan. Revenue Administrative Bulletin 2026-1 For 2025 those caps were $65,897 for a single return and $131,794 for a joint return, with the 2026 amounts adjusted upward for inflation.
One point worth emphasizing: the pension cap does not reduce your Social Security deduction. Social Security remains fully deductible on top of whatever pension deduction you claim.1Michigan Legislature. MCL – Section 206.30 – Income Tax Act of 1967 (Excerpt)
Planning Around the Federal Threshold
Because Michigan doesn’t tax Social Security and federal law does, most of the planning happens on the federal side. Drawing down a 401(k) or IRA in the year or two before claiming Social Security can keep combined income below $25,000 (single) or $32,000 (joint) once benefits begin, keeping the benefits themselves entirely free of federal tax. Roth conversions done before you claim benefits can reduce later required minimum distributions that would otherwise push combined income across the 50% or 85% lines.
The state exemption is unconditional, so nothing you do on the Michigan side changes your Social Security treatment. It’s already zero.