Several Michigan cities impose a local income tax on residents and non-residents. People who live within these cities are charged a resident local income tax that is withheld from their paychecks regardless of where they work. Non-residents who work within the city limits are charged a non-resident tax also withheld from their paychecks. The amount of non-resident income tax cannot be in excess of one-half the resident rate and is applicable only to wages earned within city limits.
Resident Local Income Tax
According to the Department of Treasury, a local income tax of 1 percent was levied on residents of the following Michigan cities in 20012: Albion, Battle Creek, Big Rapids, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield and Walker. Additional income tax was levied on certain municipalities. In 2012, residents of the city of Detroit were charged a local income tax of 2.5 percent, Highland Park residents paid 2 percent, Saginaw residents paid 1.5 percent and Grand Rapids residents paid 1.3 percent for the 20012 tax year.
Non-Resident Local Income Tax
Non-resident local income tax is charged at half the rate of resident tax. According to the Department of Treasury, the following cities levied a local income tax of 0.5 percent in 2012: Albion, Battle Creek, Big Rapids, Flint, Grayling, Hamtramck, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Springfield and Walker. Other cities levied a higher nonresident tax rate in 2012. The city of Detroit charged 1.25 percent, Highland Park levied a rate of 1 percent, Saginaw imposed a rate of 0.75 percent and Grand Rapids charged 0.65 percent.
Part-Year Resident Local Income Tax
Michigan cities that impose local income taxes require a separate schedule be completed for part-year residents. Taxpayers who move out of the city limits during the tax year are not required to pay the resident tax rate for the whole year. Various income tax schedules for each city instruct the taxpayer to separate all income earned while a resident of the city regardless of where it was earned. Income is taxed at the resident rate. The schedules require income earned within the city limits while living outside the city as a nonresident be listed in a separate column. The resulting income is taxed at half the resident rate.
Lara Lawrence has been writing professionally since 2008, with articles appearing in “The Pioneer East." Lawrence is a professional pianist and has been teaching piano for more than 20 years. She is a member of the National Federation of Music Clubs and holds a Bachelor of Science in business administration from Central Michigan University.