Michigan Payroll Tax Guide (2026)

Michigan runs a single 4.25% withholding rate, so the state layer is simple, but the local layer is not: Detroit alone takes 2.4% from residents and 1.2% from non-residents, and employers must track where each worker lives and where the work is actually performed.^[5]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: Treasury, UIA, IRS

Quick Facts

Michigan payroll at a glance

Michigan employers handle three payroll tax layers: a flat 4.25% state income tax withheld from employees, employer paid unemployment insurance on the first $9,000 of wages, and city income tax withholding in more than twenty municipalities.^[5]

State income tax withholding

4.25% flat ^[1]

UI taxable wage base

$9,000 per employee ^[5]

New employer UI rate

2.70% ^[5]

Experienced UI rate range

0.06% ^[5]

Employee-paid state payroll tax

None ^[5]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[14]

State minimum wage

$13.73 per hour ^[6]

Local minimum wage ordinances

None ^[6]

UI registration trigger

Paying $1,000 or more in wages in a calendar year, or employing at least… ^[5]

Exempt salary threshold

$35,568 per year ^[13]

Additional Medicare threshold

Over $200,000, employee only ^[3]

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What changed for Michigan payroll in 2026

Six items moved for Michigan employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Minimum wage now 13.73 Tipped cash wage set at 40% MiWAM retired, MiUI live Max weekly benefit up to 530 Flint tax moves to Treasury UI wage base stays 9,000

Forgetting the city layer for remote and hybrid workers: Michigan city income tax follows where the work is actually performed, not where the office sits. An employee who lives outside Detroit but works two days a week inside the city is a non-resident subject to Detroit withholding on that share of wages, and the Detroit Form DW-4 is what captures residence and predominant place of employment. Employers who withhold only the 4.25% state tax end up owing city tax plus penalty and interest.

Estimate

2026 Michigan payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Michigan · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate is on the annual tax rate determination issued by the UIA in December.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $9,000–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Form MI-W4 and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

Michigan runs two state payroll taxes. The table below is the whole state layer for 2026.^[5]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.06%; 2.70% new	$9,000
Income tax withholding	Employee	4.25% flat	No limit

Michigan has no lettered rate schedule. An experienced employer’s rate is the sum of a chargeable benefits component, an account building component and a nonchargeable benefits component that is 1.0% for most contributing employers and as low as 0.06% for employers with a long record of no benefit charges. New employers pay 2.7% for their first two years, except certain construction employers who receive the average construction contractor rate, which the agency has recently put between 5.3 and 8.1%.^[5]

Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 4.25% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.^[1]

Who has to register

Paying $1,000 or more in wages in a calendar year, or employing at least one worker in 20 different weeks in a calendar year. Agricultural employers become liable at $20,000 of cash payroll in a calendar quarter or 10 agricultural workers in each of 20 different weeks, and household employers at $1,000 of cash wages in a calendar quarter. Acquiring 75% or more of the assets of an existing Michigan employer also creates liability.^[5] Income tax withholding is administered separately by Michigan Department of Treasury, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in Michigan generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[5]

How to register

Cross the wage threshold→
MiUI→
Receive account number→
annual tax rate determination issued by the UIA in December→
File & deposit online

Deposit schedule

Treasury assigns monthly, quarterly or annual filing and reviews that assignment each year. Monthly and quarterly returns and payments are due on the 20th day of the month following the period, and annual filers are due February 28. Employers placed on accelerated electronic funds transfer pay on the same day as their federal deposit regardless of the amount due.^[1]

Returns, reports & due dates

Form	What it is	Due
Employer’s Quarterly Wage and Tax Report, filed in MiUI	Quarterly unemployment return	April 25, July 25, October 25, January 25
Form 5080 for monthly and quarterly periods, Form 5081 for the annual return, and Form…	Income tax withholding returns	Treasury assigns monthly, quarterly or annual filing and reviews that
Annual reconciliation	Year-end withholding reconciliation	February 28
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 25, July 25, October 25, January 25. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[5]

Pricing

Payroll Pricing

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Line items the big providers quietly bill for

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Setup fee

one-time onboarding

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extra

Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[5]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $9,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In Michigan that is $9,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating: The method Michigan Unemployment Insurance Agency uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Form MI-W4: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Michigan Department of Treasury.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Local withholding: Income or occupational tax levied by a city, county or school district and withheld by the employer alongside state tax. It is assessed separately from the state layer.

Federal, State & Local

Michigan payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

Michigan has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[14]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	2.70%	$9,000
UI, experienced	0.06%	$9,000
Income tax, standard	4.25% flat	No limit
Income tax, supplemental	4.25%	No limit

Layer 3, county & city: a real third layer

More than twenty Michigan cities levy their own income tax and the employer withholds it, based on where the employee lives and where the work is performed. Detroit is the largest: for 2026 the rate is 2.4% on residents and 1.2% on non-residents, with each exemption worth $600 a year, claimed on the Detroit Form DW-4 (Form 5527). Detroit withholding is filed with the state on Form 5323 by the 15th of the following month, and the annual reconciliation on Form 5321 is due February 28. Treasury administers Detroit today and begins processing City of Flint returns on January 1, 2027 for tax year 2026 and later; the remaining cities administer their own tax.^[7]

The state minimum wage is $13.73 an hour, effective 2026-01-01. The tipped cash wage is $5.49. No local ordinance sets a higher floor. The state rate applies across Michigan and no Michigan city publishes its own minimum wage. Workers aged 16 and 17 may be paid $11.67, which is 85% of the full rate, and a 4.25 dollar training wage applies to newly hired workers under 20 for their first 90 calendar days. Rises to $15.00 on January 1, 2027, then adjusts annually by a set formula.^[6]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[13]

FAQ

Michigan payroll FAQs

Michigan withholds a flat 4.25% from wages. The 2026 personal exemption is $5,900 a year for each exemption an employee claims on Form MI-W4. Bonuses and other compensation paid separately from regular payroll are also withheld at 4.25%, with no exemption allowance applied.

New employers are assigned 2.7% for their first two years on the first $9,000 of each employee’s wages, a maximum of $243 per employee per year. Certain construction employers instead receive the average construction contractor rate, which the UIA has recently put between 5.3 and 8.1%. After that, rates are experience rated from three components.

Detroit residents are withheld at 2.4% on all wages, wherever they work. Non-residents are withheld at 1.2%, but only on wages for work actually performed inside the city. Have every affected employee file the Detroit Form DW-4 so you have their residence and predominant place of employment on file.

Quarterly wage and tax reports are due April 25, July 25, October 25 and January 25, which is earlier than most states. They are filed in MiUI, the platform that replaced MiWAM in February 2026. A missing report carries a 55 dollar penalty.

No. Michigan has no state disability insurance, no paid family and medical leave premium and no employee share of unemployment tax. The only state level deductions are income tax withholding and, where it applies, city income tax.

The Michigan minimum wage is $13.73 an hour from January 1, 2026. Tipped employees may be paid a 5.49 dollar cash wage, 40% of the full rate, but only where tips bring them at least $8.24 more per hour. The full rate rises to $15.00 on January 1, 2027.

$9,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$13.73 an hour. No local ordinance sets a higher rate. The tipped cash wage is $5.49.

April 25, July 25, October 25, January 25. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 4 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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