Michigan does not tax SSDI benefits at the state level
Michigan has no state income tax on Social Security Disability Insurance (SSDI) benefits. This means you will not owe Michigan state income tax on the SSDI payments you receive, regardless of how much you earn from other sources or how much total income you have.
However, federal tax rules still explore. The federal government may tax a portion of your SSDI benefits depending on your total income for the year. Michigan's lack of a state income tax does not change your federal tax obligations.
If you live in Michigan and receive SSDI, you need to understand both the state rule (no tax) and the federal rule (possible tax on some benefits). The two operate independently.
Key Takeaways
- Michigan does not tax SSDI benefits under state law, so you owe zero Michigan state income tax on those payments.
- Federal tax rules may still require you to count some or all of your SSDI as taxable income on your federal return.
- Your total income from all sources — wages, pensions, interest, and SSDI — determines whether federal tax applies to your benefits.
- You may still need to file a federal return even if you owe no Michigan state tax, depending on your total income and filing status.
Why Michigan does not tax SSDI but the federal government might
Michigan eliminated its state income tax in 1967. This applies to all income sources, including SSDI. Because there is no state income tax in Michigan, the question of whether SSDI is taxable at the state level does not arise — nothing is taxed at the state level.
The federal government, however, has its own rules. The Internal Revenue Service (IRS) can tax up to 85 percent of your SSDI benefits if your combined income exceeds certain thresholds. Combined income includes half of your SSDI benefits plus all other income (wages, pensions, interest, dividends, and certain other sources).
Living in Michigan does not shield you from federal tax on SSDI. You must file a federal return and report your SSDI if your combined income crosses the IRS threshold for your filing status.
Federal income thresholds that trigger SSDI taxation
The IRS uses two thresholds to determine whether your SSDI is taxable. These thresholds have not changed since 1984 and do not adjust for inflation.
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single, Head of Household, or may have access to Widow(er) | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
| Married Filing Separately | $0 | $0 |
If your combined income falls below the first threshold for your filing status, none of your SSDI is taxable. If it falls between the first and second threshold, up to 50 percent of your benefits may be taxable. If it exceeds the second threshold, up to 85 percent may be taxable.
Combined income is calculated as your adjusted gross income plus non-taxable interest plus half of your SSDI benefits. This means even if you have no wages or other income, half of your SSDI counts toward the threshold.
How to calculate whether you owe federal tax on SSDI
Start by gathering your income documents for the year: W-2 forms from any employment, 1099 forms for pensions or interest, and your SSA-1099 form showing your SSDI payments. The SSA-1099 arrives by January 31 each year.
Add up all income except SSDI. Then add half of your SSDI benefits. This total is your combined income. Compare it to the first threshold for your filing status. If you are under it, you owe no federal tax on SSDI and may not need to file a federal return at all (depending on your other income). If you are over it, you will need to calculate the taxable portion using IRS worksheets or tax software.
The calculation is complex because the amount of SSDI that becomes taxable depends on how far above the threshold you are. Most people use tax software or a tax preparer to get this right. The IRS Publication 915 contains the full worksheets if you want to calculate it yourself.
Whether you must file a federal return in Michigan
You must file a federal return if your total income exceeds the filing threshold for your age and filing status, even if you live in Michigan and owe no state tax. The filing threshold is different from the SSDI taxation threshold.
For 2024, a single person under 65 must file if gross income exceeds $14,600. A married couple filing jointly where both are under 65 must file if combined gross income exceeds $29,200. These thresholds increase slightly each year and are higher if you are 65 or older.
If your only income is SSDI and it falls below the filing threshold, you do not have to file a federal return. However, if you have wages, pensions, or other income, you likely must file even if you live in Michigan. Filing can also be worthwhile if you are due a refund, such as from the Earned Income Tax Credit.
What to do if you receive SSDI and live in Michigan
Gather your SSA-1099 form when it arrives in January. This shows your SSDI payments for the previous year. Do not assume you owe no federal tax just because Michigan does not tax SSDI.
Calculate your combined income using the IRS method (adjusted gross income plus non-taxable interest plus half of SSDI). If it exceeds the first threshold for your filing status, you will need to determine how much of your SSDI is taxable. Use IRS Publication 915, tax software, or a tax preparer to do this correctly.
File your federal return by April 15 if you are required to file. If you are not required to file but want to claim a refund or credit, you can still file. Michigan will not require a separate state return since there is no state income tax.
Frequently Asked Questions
Do I have to pay Michigan state tax on my SSDI?
No. Michigan has no state income tax, so SSDI is not taxed at the state level. You owe zero Michigan state income tax on your benefits, no matter how much you earn from other sources.
Can I avoid federal tax on SSDI by living in Michigan?
No. Federal tax rules explore to all SSDI recipients regardless of where they live. Michigan's lack of state income tax does not change your federal obligations. If your combined income exceeds the IRS threshold, federal tax may explore to part of your SSDI.
What counts as income when the IRS checks if my SSDI is taxable?
Combined income includes your adjusted gross income (wages, pensions, interest, dividends, and other sources) plus non-taxable interest plus half of your SSDI benefits. It does not include certain items like workers' compensation or some veterans' benefits, but most common income sources count.
Do I have to file a federal return if I only receive SSDI?
Only if your SSDI exceeds the filing threshold for your age and filing status. For 2024, that is $14,600 for a single person under 65. If SSDI is your only income and it is below that amount, you do not have to file. However, filing may benefit you if you are due a refund.
Where do I get help calculating whether my SSDI is taxable?
The IRS Publication 915 contains worksheets you can use. Tax software like TurboTax or TaxAct can calculate it automatically. You can also work with a tax preparer or call the IRS at 1-800-829-1040 with specific questions about your situation.