New Michigan Tax Changes! Help or Hurt? Here’s What’s Happening!

With tax time finished and we all have either received a refund or paid our taxes, it is time to look ahead to what is happening this year for next years tax filing.

WHAT'S UP? IS THERE ANYTHING GOOD?

Funny you should ask. The answer is YES, there is some good tax news.

MSN.com/politics website reported that we are about to see a nice little shift in what we pay beginning this year. And the "good news" shift is coming from the state, not Washington.

👇 BELOW: HOW DOES MICHIGAN RATE WITH GAS TAXES? 👇

With the 2026 state budget finalized, there will be a few big phaseouts of some taxes and all for the good of many of us taxpayers.

MSN reported "the most significant change is the phaseout of Michigan’s 4.25% income tax on overtime pay, tips, and Social Security benefits over the next three years."

HERE ARE THE BIG CHANGES

1. The End of State Income Tax on Overtime Pay
Roughly 500,000 Michigan workers—across construction, manufacturing, health care, public safety, and food service—stand to benefit from the elimination of state income tax on overtime wages.

2. Tax Relief on Tips for Service-Sector Employees
About 300,000 residents in tipped professions—including servers, bartenders, and delivery workers—will see meaningful savings as Michigan phases out its tax on tip income.

3. Elimination of State Taxes on Social Security Benefits
For approximately 40,000 seniors, Michigan’s decision to eliminate state income taxes on Social Security benefits could result in average yearly savings of $500.

4. A Stronger Earned Income Tax Credit for Working Families
Michigan has also expanded the Working Families Tax Credit, which is estimated to benefit around 650,000 families. The credit is retroactive to 2022, meaning you may receive an average refund of more than $3,000 based on taxes paid over the past three years.

What a gift! Happy 2026!