Notice: Income Tax Rate of Individuals and Fiduciaries Reduced to 4.05% For The 2023 Tax Year

Date: March 30, 2023

Individuals and fiduciaries subject to tax under Part 1 of the Income Tax Act, MCL 206.1 et seq., are generally subject to tax at a 4.25% tax rate under Section 51 of the Income Tax Act, MCL 206.51. However, for each tax year beginning on and after January 1, 2023, that 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 recently finalized data from the ACFR for the fiscal year that ended September 30, 2022, it has been determined the conditions requiring a reduction to the current tax rate have been met. Based on the formula prescribed by Section 51(1)(c), the reduction to the current tax rate is equal to 0.20 percentage points (0.20%). Thus, the tax rate applicable to all individuals and fiduciaries for the 2023 tax year is 4.05%. This revised rate is an annual tax rate that is effective as of January 1, 2023.

Treasury’s withholding rate tables for the 2023 tax year will not be updated to accommodate the revised rate. Individuals and fiduciaries with questions about the effect of the rate change on the amount of tax being withheld from their income should contact their employer or administrator directly.

Treasury will update forms, instructions, and guidance as necessary to reflect the change to the annual income tax rate for the 2023 tax year. These changes, as well as any other future guidance related to the 2023 tax year, will be available on Treasury’s website at www.michigan.gov/taxes.