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Michigan Tax Law

One of the major components to living in Michigan is that you have to pay state taxes. Most things in Michigan have taxes levied against them, especially for essentials like food, water, utilities and your income. Taxes can whittle away at your budget quickly, though there are ways to reduce the burden through exemptions and credits.

Whether you live in Detroit, Grand Rapids or Ann Arbor, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Michigan tax law articles to become familiar with them and to avoid penalties.

Michigan Personal Income Taxes

Michigan charges a flat state income tax rate of 4.25 percent to all residents as of January 2017, regardless of filing status or income. The Department of Treasury provides income tax tables that can help you determine how much of your income should be withheld for tax depending on your payroll period and the number of exemptions you can claim.

Michigan Property Taxes

There are two types of property that are taxed in Michigan: real and personal property. Real property includes land, infrastructure, buildings and sewage and water facilities. Personal property includes any tangible property besides real estate that’s related to business, including machinery, equipment, furniture, etc.

Property taxes are charged based on a property’s assessed value, which is never more than 50 percent of its true cash value in a local housing market. Property tax rates vary by county as there is no state property tax rate and local governments are responsible for collecting property taxes.

Michigan Sales and Use Taxes

The statewide sales and use tax rate in Michigan is six percent on the total price of retail sales and four percent for utility charges, including electricity, non-motor fuel gasses and home heating fuels. Use taxes are charged in place of sales taxes on the purchase of goods or services from out-of-state sellers or vendors who do not collect sales taxes.

Michigan doesn’t permit the enforcement of local sales and use taxes, so the rates are the same regardless of location.

Michigan Sin Taxes

“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

Michigan’s sin taxes include:

  • $0.10/cigarette or $2/pack of 20 cigarettes.
  • $0.50/cigar that costs $1.5625 or more each at wholesale price.
  • 32 percent of the wholesale price of cigars that cost less than $1.5625 each at wholesale price.
  • 32 percent of the wholesale price on other tobacco products.
  • $0.135/liter of wine with less than 16 percent alcoholic volume.
  • $0.20/liter of wine with more than 16 percent alcoholic volume.
  • $0.48/liter of mixed spirits.
  • $6.30/barrel (31 gallons) of beer.

Gambling and lottery winnings are considered taxable income in Michigan. Michigan requires taxpayers to report all gambling winnings on their personal income tax forms for the state. Gambling losses don’t qualify for deductions in state income taxes.

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