Detroit's Income Tax: The Only One Michigan Collects for You

Detroit was the first Michigan city to tax income. It struck out on its own in 1962, before the state even wrote the rulebook. Two years later the Uniform City Income Tax Act (PA 284 of 1964) set the pattern the rest would follow. That law capped most cities at 1 percent on residents, and half that on people who only work there.

Detroit doesn’t sit under that cap. It rides in a higher tier the same act carved out. And it charges more than any other city in the state: 2.4 percent if you live in Detroit, 1.2 percent if you commute in for the job. Those numbers have held since 2013. Only Highland Park, the small city Detroit wraps all the way around, sits anywhere near it, at 2 percent and 1 percent.

The odd part isn’t the rate. It’s who takes the check.

Every other taxing city in Michigan runs its own return. Grand Rapids, Lansing, Flint, roughly two dozen of them, each hand you a city form. Detroit used to as well. Then the bankruptcy landed, and starting with the 2015 tax year the Michigan Department of Treasury took over collecting the tax for the city. So the Detroit return now goes to Lansing, folded in with your state filing, not to a City-County Building window downtown. It’s the one city income tax in the state the government collects on the city’s behalf.

If you live in Detroit but earn your paycheck in another taxing city, you don’t get billed twice over. The law hands you a reciprocal credit, so the same wages aren’t taxed full freight by both towns. And if you’re a suburbanite working a fully remote job for a Detroit employer, the nonresident tax follows where you physically sit, not where the company’s mailing address is. No hours in the city, no nonresident tax.

The particulars of your situation are a question for a preparer or the income tax office, not a note like this one. But the shape of it is worth knowing before you wonder why your Detroit paycheck and your Lansing envelope seem to be talking to each other.