Notice: 4.25% Income Tax Rate for Individuals and Fiduciaries in 2024 Tax Year

Date: February 28, 2024

Individuals and fiduciaries subject to tax under Part 1 of the Income Tax Act, MCL 206.1 et seq., are subject to tax at the rate provided under Section 51 of the Income Tax Act, MCL 206.51. For each tax year beginning on and after January 1, 2023, the rate may be subject to a formulary reduction as provided by Section 51(1)(c) if there is a determination that the percentage increase in general fund revenue from the immediately preceding state fiscal year exceeded the inflation rate for the same period. That determination is required to be made jointly by the State Treasurer, the Director of the Senate Fiscal Agency, and the Director of the House Fiscal Agency based on financial data from the Annual Comprehensive Financial Report (ACFR).

Based on data for the state fiscal year ended September 30, 2023, it has been determined that the conditions under Section 51(1)(c) requiring a formulary reduction to the rate for tax year 2024 have not been met. While the rate was previously reduced to 4.05% under Section 51(1)(c) for tax year 2023, Attorney General Opinion No. 7320 concluded that rate reduction is effective for that tax year only. That conclusion has been challenged by taxpayers and other interested parties through a lawsuit (Associated Builders and Contractors of Michigan v Eubanks) filed in the Michigan Court of Claims; however, on December 21, 2023, the court issued an opinion that ultimately upheld the Attorney General’s position. Associated Builders and Contractors of Michigan v Eubanks is now on appeal at the Michigan Court of Appeals. Therefore, the rate in effect under Section 51 for the 2024 tax year is 4.25%.

Individuals and fiduciaries with questions about the effect of the rate on the amount of tax being withheld from their income should contact their employer or administrator directly.