What Changed
Michigan's 2023 tax law began phasing back in a full exemption on pension and retirement income from state income tax. The phase-in completes in tax year 2026 — meaning most Michigan retirees will owe zero state income tax on their pension, 401(k), IRA, and Social Security income starting with their 2026 return.
This reverses a 2011 law that had taxed retirement income and affected roughly 500,000 Michigan households.
Source: Michigan Department of Treasury — Retirement and Pension Benefits
Who Qualifies and for How Much
| Birth Year | 2026 Exemption | Note |
|---|---|---|
| Born before 1946 | Full exemption | All retirement income |
| Born 1946–1952 | Up to $56,961 (single) / $113,922 (joint) | Fully phased in by 2026 |
| Born 1953–1966 | Up to $56,961 (single) / $113,922 (joint) | Can choose between age-based or Social Security timing |
| Born after 1966 | No pension exemption | Standard deductions apply |
Amounts are indexed and may change. Confirm current limits at michigan.gov/taxes.
What Retirees Should Do
- Adjust your withholding: If you're having Michigan income tax withheld from pension payments, you may be able to reduce or eliminate that withholding. File a new MI W-4P with your pension administrator.
- File for a refund if you overpaid: The phase-in was partially in effect for 2023, 2024, and 2025 — if you didn't claim the exemption, you may be owed a refund. Amended returns go back 4 years.
- Talk to a tax professional: Social Security, pension, and IRA income interact with federal taxation rules that the state exemption doesn't affect.