Michigan Capital Gains Tax Calculator 2026

How Michigan taxes a capital gain

Statutory authority: MCL 206.51, as determined for tax year 2026 by Michigan Dept of Treasury notice, 15 April 2026 (retrieved 1 September 2026)

You cannot read Michigan’s rate out of Michigan’s tax code

Almost every state answers the question "what is the rate?" by printing a number in a statute. Michigan does not. Section 51 of the Income Tax Act sets 4.25% as a starting point and then makes it conditional: for each tax year beginning on or after 1 January 2023, the rate falls by a formula whenever general fund revenue has grown faster than inflation over the preceding fiscal year.

That comparison is not something a taxpayer performs. The statute assigns it jointly to the State Treasurer, the Director of the Senate Fiscal Agency and the Director of the House Fiscal Agency, working from the Annual Comprehensive Financial Report. Until those three have published their determination, the year’s rate is genuinely unknown — not merely unpublished. Reading the code tells you the mechanism and nothing whatever about the answer.

This is why the citation on this page is a Treasury notice rather than a section number. Anyone quoting only MCL 206.51 for a specific year is quoting the machinery, not the output.

What the determination said for 2026

The Department of Revenue published its notice on 15 April 2026. Working from the Fiscal Year 2025 report, general fund and general purpose revenue had DECREASED by 1.56% while inflation rose 2.70%. Revenue growth therefore did not outpace inflation, the formula was never reached, and the notice states the conclusion plainly: the rate in effect under Section 51 for the 2026 tax year is 4.25%.

The direction is worth dwelling on, because it is the opposite of the way rate triggers are usually described. Michigan’s mechanism only ever cuts. A year of falling revenue does not raise the rate; it simply fails to lower it. The 4.25% figure is the ceiling the statute has held since 2012, and the trigger is the only route away from it.

It has fired once. For tax year 2023 the conditions were met and the rate dropped to 4.05% for that year alone, then reverted. Anyone who remembers 4.05% and assumes it persisted is a year and a rate behind.

Two bills propose a flat 3.9%. Neither is law

Senate Bill 0151 and House Bill 5519 would replace the current structure with a flat 3.9%. Both have been introduced and referred to committee. Neither has been enacted, and an introduced bill changes nothing at all about what anyone owes.

They are noted here because proposals of this kind circulate as though they were settled, and because a reader who finds 3.9% quoted somewhere deserves to know exactly what it is. If either passes it will affect a future tax year, and the figure on this page will change when the law does — not before.

Michigan city income taxes sit on top and are not computed here

Around two dozen Michigan cities levy their own income tax in addition to the state rate, and those taxes can reach capital gains for residents. Detroit charges 2.4% of resident income; Grand Rapids, Lansing, Flint and others charge between 1% and 2%. A Detroit resident selling shares faces the state 4.25% and the city rate on top of it.

This calculator computes the state layer only. If you live in a city that levies an income tax, the figure here is genuinely incomplete rather than merely approximate, and you should add your city rate to it. The omission is disclosed rather than quietly absorbed, because a Michigan resident who compares this number against a city bill needs to know which one it is.

You cannot time a sale around a rate you will not learn until April

The determination for a tax year is published part-way through it — the 2026 notice appeared on 15 April 2026, more than three months after the year it governs began. Anyone selling in January is transacting under a rate that has not yet been announced, and will not be for a quarter.

In practice this makes deferring a Michigan sale to catch a lower rate close to unworkable. The trigger depends on a full fiscal year of general fund revenue measured against inflation, neither of which is knowable in advance, and the most a successful firing has ever been worth is the 0.20 points that took the rate to 4.05% in 2023. Against that, the federal consequences of moving a disposal across a year boundary — a different bracket, a different net investment income position — are larger and knowable now.

The honest planning advice for Michigan is therefore to ignore the state rate when choosing when to sell, and to decide on the federal position. The state layer is a flat 4.25% that you will find out about in the spring.

What Michigan does not change

Michigan gives capital gains no preferential rate, no holding-period distinction and no exclusion for long-held assets. A gain held twenty years and a gain held two months are taxed identically here, so the whole of the holding-period saving is federal and none of it is Michigan’s.

The federal computation is untouched by residence. The 0/15/20% ladder, the 3.8% net investment income tax, the Section 121 home-sale exclusion and Section 1250 recapture all apply exactly as they would elsewhere; the state charge sits on top of that result rather than replacing any part of it.

The figure here stacks your gain on federal ordinary taxable income. Michigan starts from federal adjusted gross income and applies its own additions, subtractions and personal exemption, none of which are modelled — so the state number is close for a straightforward wage-and-sale year and rough where a Michigan return carries significant adjustments.

A worked Michigan example

Every figure below is computed by the same engine that powers the calculator above, at the moment this page was built — not typed in by hand. When the tax-year data is updated, this example updates with it.

A $150,000 gain on a $120,000 salary

A single filer in Michigan earning $120,000 sells long-held shares for a $150,000 gain. Michigan applies one rate to the whole of it, whatever the holding period.

Taxable income after deduction: $253,900
Taxable gain: $150,000
Tax owed without the sale: $17,570
Tax the sale added: $25,160
of which net investment income tax: $2,660
Total federal tax: $42,730
Michigan state tax: $6,375
Effective rate on the gain: 16.77%

The state layer is a flat 4.25% of the gain, with no band structure to soften it and no reduction for having held the asset. Note that this figure would have been identical in 2024 and 2025: the trigger has not fired since 2023.

Caveats on this example (2)

Net investment income was derived from capital gains and qualified dividends only. Interest, non-qualified dividends, rents, royalties and passive business income inside ordinaryIncome are also net investment income under IRC 1411(c) and are not counted here.
Michigan: local income taxes are not modelled and apply on top of the state figure. Around two dozen Michigan cities levy their own income tax, Detroit at 2.4% for residents. City tax is not computed here.

Show the working — 13 steps, each with its citation

Net short-term capital gain or loss for the year$0Short-term / long-term nettingIRC 1222; IRS Pub. 550
Assets held one year or less. Taxed at ordinary rates if a net gain.
Net long-term capital gain or loss for the year$150,000Short-term / long-term nettingIRC 1222; IRS Pub. 550
Assets held more than one year. Eligible for the 0/15/20% rates.
Standard deduction-$16,100Deduction from adjusted gross incomeRev. Proc. 2025-32 4.14(1) (IRC 63(c)(2))
Adjusted gross income of $270,000 less $16,100.
Taxable income$253,900Taxable incomeIRC 63(a)
The figure the rate tables and the capital gain ceilings are both measured against.
Ordinary income taxed at 10%$1,240Ordinary income tax bracketsRev. Proc. 2025-32 4.01 (IRC 1(j)(2))
$12,400 of taxable income between $0 and $12,400.
Ordinary income taxed at 12%$4,560Ordinary income tax bracketsRev. Proc. 2025-32 4.01 (IRC 1(j)(2))
$38,000 of taxable income between $12,400 and $50,400.
Ordinary income taxed at 22%$11,770Ordinary income tax bracketsRev. Proc. 2025-32 4.01 (IRC 1(j)(2))
$53,500 of taxable income between $50,400 and $103,900.
Ordinary income stacked below the long-term gain$103,900LTCG bracket stackingIRC 1(h); Schedule D Tax Worksheet, Form 1040 instructions
Long-term gain is taxed by reference to where it sits ON TOP of $103,900 of other taxable income, not from the bottom of the rate table.
Long-term gain taxed at 15%$22,500LTCG bracket stackingRev. Proc. 2025-32 4.03 (IRC 1(h), 1(j)(5))
Gain between the $49,450 zero-rate ceiling and the $545,500 15% ceiling.
Net investment income tax threshold$200,000IRC 1411 thresholdIRC 1411(a)-(b); 26 C.F.R. 1.1411-2
Modified AGI of $270,000 against the $200,000 threshold for a single filer. This threshold is statutory and is not adjusted for inflation.
Net investment income tax at 3.8%$2,660Net investment income taxIRC 1411(a)-(b); 26 C.F.R. 1.1411-2
3.8% of $70,000, the lesser of net investment income ($150,000) and the amount by which modified AGI exceeds the threshold ($70,000). Here the binding figure is the excess of modified AGI over the threshold.
Michigan income tax at 4.25%$6,375State flat income tax on capital gainsMCL 206.51, as determined for tax year 2026 by Michigan Dept of Treasury notice, 15 April 2026
Flat 4.25%, taxing capital gains as ordinary income. THE STATUTE ALONE DOES NOT ANSWER THIS: MCL 206.51(1)(c) makes the rate subject to a formulary reduction whenever general fund revenue growth outpaces inflation, so the operative rate is decided annually by a joint determination of the State Treasurer and the two fiscal agencies. For 2026 they determined it did not fire — general fund revenue FELL 1.56% while inflation rose 2.70% — and the notice states: "the rate in effect under Section 51 for the 2026 tax year is 4.25%." That is why the citation is the notice and not just the statute. WATCH ITEM FOR 2027: SB 0151 and HB 5519 would move Michigan to a flat 3.9%. Both are INTRODUCED and referred to committee, not enacted, so neither affects 2026. Check their status before rolling this file forward.
Total tax$49,105Sum of all tax stepsRev. Proc. 2025-32 (I.R.B. 2025-45)
$49,105 on $270,000 of total income, an effective rate of 18.19%.

What this calculator does not cover for Michigan

The Michigan figure stacks your gain on your federal ordinary taxable income. Michigan computes its own taxable income with its own additions and subtractions, which are not modelled here — so treat the state number as a close approximation for a straightforward wage-and-sale situation, and as a rough one if your return carries significant state adjustments.

Full-year residency is assumed throughout. Part-year residents, non-residents, and gains sourced to property in another state all turn on rules this calculator does not model. The complete list of what is in and out of scope is on the methodology page.

Other states

See the full 2026 capital gains guide for the federal rules that apply wherever you live — the rate ladder, the net investment income tax, the home-sale exclusion and depreciation recapture — plus every state we currently cover.