Michigan taxes capital gains at 4.25%. Combined with federal taxes, your effective rate on a home sale could reach 23.1%.
MI State Rate
4.25%
Flat tax rate
Federal Rate
15%
Most common long-term bracket
Combined Effective
23.1%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Michigan is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Michigan don't qualify for the exclusion. You'll owe 4.25% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Michigan, homes sold in October sell for 13% more than those sold in January (-17%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in Michigan and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
| 3.05% | $4,575 | Flat tax rate | |
| 3.5% | $5,250 | Flat tax rate (2026) | |
MichiganYou | 4.25% | $6,375 | Flat tax rate |
| 7.65% | $11,475 | Top rate; 30% deduction for long-term gains |
Selling in Indiana instead of Michigan would save $1,800 in state tax on a $150K gain.
Michigan taxes capital gains at a flat 4.25% rate. The flat rate makes tax planning straightforward for home sellers.
The Detroit metro, Grand Rapids, and Ann Arbor are the primary markets. Ann Arbor's university-driven market can generate substantial gains.
Michigan does not offer a preferential rate for capital gains. All investment income is taxed at 4.25%.
Lake Michigan waterfront properties have appreciated significantly and may generate gains above the exclusion for long-term owners.
Offering buyer concessions?
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