Michigan’s 4.25% rate for 2026
Michigan taxes capital gains at its flat income tax rate, which Treasury set at 4.25% for 2026 on April 15. A single resident whose Michigan taxable income rises from $60,000 to $110,000 owes $2,125 more before credits.
Twenty-four Michigan cities, including Detroit, Grand Rapids and Lansing, levy their own income tax on residents; check whether your city return picks up the gain. Michigan’s phased-in retirement subtraction covers pensions and retirement distributions, not a gain realized in a taxable account. The worksheet calculates the state tax only; add any city tax with the prepared-liability option.
Michigan approved resident annual comparison
Michigan Treasury’s April 15, 2026 determination fixes the 2026 individual income-tax rate at 4.25%. This year-specific determination is distinct from historical rate changes and an assumed future trigger. The annual-base estimate applies 4.25% after independently approved Michigan additions, subtractions, deductions and exemptions; it does not apply that percentage blindly to gross sale proceeds.
Prepare federal-to-Michigan adjustments and any transaction-specific subtraction in both complete annual scenarios. Capital basis differences, retirement-related allowances and eligibility changes can affect the state taxable balance. A federal preferential long-term rate does not become a Michigan preferential rate. Retain the supporting state worksheet showing why the gain is included, excluded or adjusted before entering the base.
Approved Michigan taxable income and complete usable nonrefundable credits are required for each side of the comparison. A $20,000 increase in that base adds $850 before credit changes. Local city income taxes, nonresident allocations, refundable amounts and unsupported final-return assessments require the final-liability option. Blank credit fields preserve the visible before-credit estimate while leaving combined tax unresolved.
Michigan preparation checklist
- Actual state taxable bases after approved basis, netting, deductions and exemptions
- April 15 determination for 2026
- Michigan city tax outside state estimate