Active-duty pay
Fully Exempt
Active-duty pay exempt for MI residents.
State Guide · MI
Michigan — Military Tax Treatment
Michigan is one of the cleaner states for all military pay categories. Active duty, retirement, and Guard drill pay are all exempt for MI residents. No station-outside-state requirement.
Tax treatment at a glance
Guard & Reserve drill pay
Fully Exempt
Michigan's military pay exemption broadly covers Guard and Reserve drill pay for MI residents. No station-outside-state requirement.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt.
The numbers · verified for tax year 2025
Top marginal rate
4.25%
Retirement-pay exemption
Full
Military retirement/pension benefits for U.S. Armed Forces service are fully exempt from Michigan income tax — no dollar cap, no age requirement.
Standard deduction
Michigan is a flat 4.25% with no general standard deduction; it uses a personal exemption ($5,800 per person for 2025). Filers 67+ may claim a separate $20,000 single / $40,000 joint deduction against all income.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Michigan included.
Survivor Benefit Plan (SBP)
Follows retirement
Michigan exempts military retirement — SBP annuities are generally exempt.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Michigan, Michigan cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Michigan can keep Texas as their tax domicile and avoid Michigan state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Michigan exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Guard pay exemption: claim on MI-1040 Schedule 1 using the military pay deduction line
- 02Retirement: MI Form 4884 for pension/retirement deduction
Veteran-specific tax benefits
Disabled veteran property tax exemption.
Official authority
https://www.michigan.gov/treasury ↗State tax law changes annually. Verify current rules with the Michigan Department of Revenue before making any tax decision.
Michigan military tax — common questions
Does Michigan tax military retirement pay in 2026?
Michigan fully exempts military retirement pay. Military retirement pay fully exempt.
Does Michigan tax active-duty military pay?
Michigan fully exempts active-duty military pay for state residents. Active-duty pay exempt for MI residents. Under the SCRA, Michigan can only tax the military pay of service members who are legally domiciled in Michigan — not those merely stationed there.
Does Michigan tax National Guard and Reserve drill pay?
Michigan fully exempts Guard and Reserve drill pay. Michigan's military pay exemption broadly covers Guard and Reserve drill pay for MI residents. No station-outside-state requirement.
Is VA disability compensation taxed in Michigan?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Michigan — taxes it as income.
If I'm stationed in Michigan but claim another state, can Michigan tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Michigan cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides