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Michigan is cutting income taxes for 2023. How much will you save?

Money on top of forms
Michigan’s tax rate will fall from 4.25 percent to 4.05 percent for tax year 2023, according to the state Treasury. (Shutterstock)
  • Michigan income tax rate will drop to 4.05 percent for tax year 2023
  • Estimate your average savings using a Bridge Michigan calculator
  • Whitmer administration says the cut is for one year only, while Republicans contend the tax decrease is permanent 

LANSING — Michigan's individual income tax rate is dropping because of a recent spike in state revenues that triggered what the Whitmer administration is calling a one-year cut. 

The rate is going from 4.25 percent to 4.05 percent for tax year 2023, Michigan Treasurer Rachel Eubanks announced Wednesday.  

That means any taxable income you earn this year will be subject to the lower rate. You'll see the savings when you file in early 2024 (not in the tax filings due next month).

Use the calculator below to see your estimated savings:

How much might you save in Michigan income taxes?

Michigan’s income tax rate is falling from 4.25 percent to 4.05 percent for tax year 2023 after a spike in state revenues triggered an automatic cut.

This is a simple calculation and broad estimate. Actual savings may vary depending on the complexity of your return, including any additional deductions or exemptions you may qualify for.

Use your current federal taxes to get your adjusted gross income and exemptions, which are typically yourself, a spouse (if you file jointly) and your dependent children.

Taxes, current rate (4.25 percent): $ 
Taxes, lower rate (4.05 percent): $ 
Savings: $ 

The Michigan Treasury estimates the one-year rate cut will save taxpayers — but cost the state in revenue — a combined $650 million. The rate is poised to return to 4.25 percent for tax year 2024, according to the Whitmer administration.


Because Michigan has a flat income tax rate, higher earners will save the most money from the temporary income tax rate reduction. Many lower-income earners will save less than they would have under $180 rebate checks previously proposed by Gov. Gretchen Whitmer. 

But everyone who pays income taxes will see at least some benefit.


What about other tax cuts?

The one-year income tax cut is separate from new laws Whitmer signed earlier this month to expand the Earned Income Tax Credit for lower-income workers and repeal the so-called pension tax on retirees.

Those targeted tax cuts also take effect in the current 2023 tax year, meaning qualifying Michiganders will see additional savings from those cuts when they file their taxes in early 2024. 

The formulas for each of those tax cuts are relatively complicated, so they are not included in the calculator above.

The Whitmer administration estimates about 738,000 residents will save an average of $600 from the expansion of the Earned Income Tax Credit. The pension tax repeal, meanwhile, is projected to save about 500,000 households an average of $1,000 each.

So no rebate checks? And why only a temporary rate cut?

Whitmer earlier proposed sending $180 "inflation relief" checks to individual tax filers, or $90 each to married couples, as part of her broader tax relief package. 

But legislative Republicans blocked those checks in order to preserve the income tax cut, which they anticipated would be permanent.

A 2015 law requires the state to lower its income tax rate any year in which general fund revenues significantly outpace inflation. The rebate checks would have redirected revenues in a way that would have prevented the tax rate reduction from taking place. 


GOP architects of the 2015 law — including then-Gov. Rick Snyder — contend it was designed to trigger a permanent income tax rate cut. 

But that's now what the law actually says, according to Democratic Attorney General Dana Nessel, who on Tuesday issued a controversial legal opinion stating that under the language of the 2015 law, the tax cut will only last for one year. 

That interpretation infuriated Republicans, who have hinted at possible legal challenges ahead. Because Democrats now control the Legislature, any lawsuits would likely have to come from outside groups or individual taxpayers. 

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