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Capital Gains Tax in Michigan
By Priya Raman
A flat rate that doesn't change with the size of the sale.
A flat rate that doesn't change with the size of the sale.
Michigan applies a single flat rate to income, capital gains included, so the math on a property sale doesn't shift with the size of the gain. Combined with federal and NIIT, the total reaches up to 28.1% (20% federal + 3.8% NIIT + 4.25% state).
The 28.1% doesn't have to come due at closing. A 1031 exchange defers the entire combined rate, state and federal both, as long as all proceeds go into a qualifying replacement property rather than the seller's pocket. Set up the swap in the 1031 exchange calculator and get your deadline dates from the timeline calculator.
Michigan taxes capital gains as ordinary income at a flat 4.25% state rate. Stack that against the federal 20% and 3.8% NIIT and a property sale reaches the 28.1% combined figure. Run the specific numbers, depreciation recapture included, through the capital gains tax calculator.
The rate above is a ceiling, not a guarantee; your actual Michigan liability depends on income, basis, and how much of the gain is recapture. Run your own Michigan figures through the 1031 exchange calculator.