Grayling: Michigan's Smallest City With an Income Tax

Fewer than 2,000 people live in Grayling. It sits Up North on the Au Sable River, better known for trout and canoe liveries than for tax forms. Yet this little Crawford County seat runs its own income tax office — one of the smallest cities in the state to bother with one, and the tax it collects is the same size as Lansing’s.

The rate is the state standard: 1% if you live inside the city limits, and 0.5% if you live elsewhere but work at a job inside them. That ceiling comes from a 1964 state law — the Uniform City Income Tax Act — which caps most Michigan cities at exactly those two figures. So a paycheck earned in Grayling is treated no differently than one earned in Flint or Jackson. Roughly two dozen Michigan cities levy this tax at all, and most visitors never guess a place this size is one of them.

A few things soften the surprise. The tax lands on earned income — wages and business profit — not on Social Security or most retirement checks, which matters in a town with plenty of retirees. It follows the city line, not the mailing address. A “Grayling” address out in the surrounding township can sit outside the taxed area entirely, so the post office is not the last word here. And if you already pay income tax to another Michigan city where you work, you get a credit so the same wages aren’t taxed twice over.

It’s a separate return from your state and federal filing, handled by Grayling’s own income tax department rather than the state. The forms and the current year’s deadline are posted there. If your own situation is knotty — a move mid-year, income split across two cities, a home near the edge of the line — a preparer or the Grayling office can sort out what you actually owe.