Key figures
Michigan payroll
2026, with sources
State withholding and unemployment
Every employer required to withhold federal income tax from Michigan wages registers with Treasury and withholds Michigan tax at 4.25% for 2026, after a $5,900 personal exemption per exemption claimed on Form MI-W4. Out-of-state employers with employees working in Michigan register too. Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin.
The Unemployment Insurance Agency charges a new employer 2.7% for its first two years (5.0% in construction for 2026), on the first $9,000 of each employee’s wages for employers in good standing. New hires are reported to the Michigan New Hires Operation Center within 20 days.
Minimum wage and sick time after 2025
Michigan rewrote its wage and leave rules in early 2025. The minimum wage is $13.73 an hour from January 1, 2026 and rises to $15.00 on January 1, 2027. The Earned Sick Time Act, effective February 21, 2025, covers every employer: those with more than ten employees provide up to 72 hours of paid sick time a year, and small employers provide 40 hours.
Take a five-person startup that hires its first Michigan employee, a support lead in Grand Rapids. It registers with Treasury for withholding, opens a UIA account, writes a 40-hour paid sick time policy (it is a small employer), registers with the City of Grand Rapids for city withholding, and carries workers’ compensation. When it passes ten employees, the sick time entitlement goes to 72 hours.
City income taxes
Twenty-four Michigan cities tax income. Detroit taxes residents at 2.4% and nonresidents working in Detroit at 1.2%, and its withholding is filed with the state Treasury. The other cities — among them Grand Rapids, Lansing, Flint, Saginaw, Pontiac and East Lansing — have their own forms and filing. Each city sets its own rules for which employers must withhold — generally those located or doing business in the city — so the city’s own guidance is the place to check.
Deadlines
- Feb 28Annual sales, use and withholding reconciliationForm 5081
- 15th of the following monthCity of Detroit withholding return (monthly filers)
- Within 20 days of hireNew-hire report
The federal baseline
This page covers what Michigan adds. The federal rules underneath it apply here too.
Common questions
Does Michigan’s sick leave law apply to a three-person startup?
Yes. Since February 21, 2025 the Earned Sick Time Act covers every Michigan employer. Employers with more than ten employees must allow up to 72 hours of paid sick time a year; small employers (ten or fewer) must allow 40 hours paid. Employees accrue time as they work, or the employer can frontload it.
We hired someone in Detroit. Who gets the city tax?
Detroit’s income tax is withheld and filed with the Michigan Department of Treasury, not the city. If you are registered for Michigan taxes there is no separate registration; Detroit returns use your FEIN, and monthly returns are due the 15th of the following month. The other 23 taxing cities administer their own withholding.
Payroll next door
- INIndiana payrollIndiana withholds 2.95% state tax plus a county tax fixed by the employee’s January 1 county; new employers pay 2.5% UI on the first $9,500, and the minimum wage is $7.25.
- OHOhio payrollOhio payroll carries state, city and school district income taxes, UI on the first $9,000 plus a 0.15% fee for 2026, and no state paid leave program.
- WIWisconsin payrollWisconsin withholds by bracket, charges new employers 3.05% UI on the first $14,000, keeps a $7.25 minimum wage, has no paid leave program and requires workers’ comp early.
How Michigan compares
- No tax on wagesStates with no state income tax on wagesMichigan: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programMichigan: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesMichigan: city, county or district taxes on wages. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Michigan guide
- AccountingAccounting and state tax in MichiganCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in MichiganSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in MichiganPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in MichiganRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in MichiganCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.