Michigan
#5
Of 15 curated destinations
Sample SS + RMD: $0 state tax (under MI deduction cap)
- Social Security
- Not taxed (state)
- Withdrawal
- Not taxed (state)
- Property estimate
- $4,760
- State income tax on sample
- $0 modeled
Compare different destinations
2026 · age 73 single retiree
2026 · age 73 single retireeMichigan vs Illinois for Retirees
Michigan ranks #5 against #10 for Illinois among 15 curated destinations. Same sample retiree in both: $30,000 of Social Security, a required withdrawal of about $30,189, and a $400,000 home.
By Sammy S. · Founder · AuthorUpdated for 2026
More retiree-friendly on tax
Michigan ranks higher
Better on the combination of Social Security treatment, retirement-income treatment, and estate or inheritance tax.
Both destinations model $0 state income tax on this sample mix — federal tax on up to 85% of benefits can still apply in either.
Side-by-side destination scoreboard
Illinois
#10
Of 15 curated destinations
Sample SS + RMD: $0 modeled state income tax
- Social Security
- Not taxed (state)
- Withdrawal
- Not taxed (state)
- Property estimate
- $7,520
- State income tax on sample
- $0 modeled
Treatment ladder: Michigan vs Illinois
State rules first, then how they land on the sample retiree, then the levies that outlive income tax.
| Measure | Michigan | Illinois |
|---|---|---|
| Social Security (state rule) | SS exempt from state tax | SS exempt from state tax |
| Social Security on the sample | Not taxed (state) | Not taxed (state) |
| Retirement income (state rule) | Retirement income exempt | Retirement income exempt |
| Required withdrawal on the sample | Not taxed (state) | Not taxed (state) |
| Estate / inheritance tax | No state estate or inheritance tax | Estate tax (exemption ~$4M) |
| Property tax on a $400,000 home | $4,760 (1.19%) | $7,520 (1.88%) |
| Combined sales tax rate | 6% | 8.98% |
Social Security (state rule)
MichiganSS exempt from state tax
IllinoisSS exempt from state tax
Social Security on the sample
MichiganNot taxed (state)
IllinoisNot taxed (state)
Retirement income (state rule)
MichiganRetirement income exempt
IllinoisRetirement income exempt
Required withdrawal on the sample
MichiganNot taxed (state)
IllinoisNot taxed (state)
Estate / inheritance tax
MichiganNo state estate or inheritance tax
IllinoisEstate tax (exemption ~$4M)
Property tax on a $400,000 home
Michigan$4,760 (1.19%)
Illinois$7,520 (1.88%)
Combined sales tax rate
Michigan6%
Illinois8.98%
Why each destination is popular
Michigan: 2026 PA 4 phase-in at 100% — deduct qualifying retirement income up to ~$67,610 single.
Illinois: Exempts SS and most retirement distributions — estate tax caveat.
Caveats that move the answer
- 2026 Michigan deduction caps at $67,610 single / $135,220 joint (Michigan ORS PA 4 FAQ). Sample RMD is under the single cap.
- Illinois generally exempts retirement distributions from income tax but levies a state estate tax.
- Combined sales rates differ by 2.98 points, and property relief for seniors is set locally — check the county before committing.
Key takeaways — Michigan vs Illinois
- Michigan ranks higher for retirees — #5 vs #10 on Social Security, retirement-income, and death-tax treatment.
- Sample retiree: single, age 73, $30,000 of Social Security and a required withdrawal of about $30,189 from an $800,000 traditional IRA.
- Michigan: Sample SS + RMD: $0 state tax (under MI deduction cap). Illinois: Sample SS + RMD: $0 modeled state income tax.
- Both destinations model $0 state income tax on this sample mix — federal tax on up to 85% of benefits can still apply in either.
- Michigan: No state estate or inheritance tax. Illinois: Estate tax (exemption ~$4M).
- This is a fixed educational vignette — your own age, balance, and filing status can change which state looks better.
Michigan vs Illinois for retirees in 2026
Popular retirement moves often come down to how a state treats Social Security benefits and required withdrawals from a traditional IRA or 401(k). This page runs the same sample retiree — single, age 73, with Social Security and an IRS-required minimum distribution — through both states' rules.
Michigan scores better on this destination list, by about 1.00 points on the underlying friendliness score.
Read the treatment ladder for the state-by-state rule, then the sample outcome, then estate and property context before comparing your own numbers.
Social Security rules vs required-withdrawal rules
Michigan — benefits: SS exempt from state tax. Sample required withdrawal: Not taxed (state).
Illinois — benefits: SS exempt from state tax. Sample required withdrawal: Not taxed (state).
These are two separate state decisions. A state can exempt Social Security entirely and still tax traditional IRA or 401(k) withdrawals as ordinary income — that combination is common among otherwise “retiree-friendly” states.
What outlives income tax: property, sales, and death taxes
Modeled property tax on the same $400,000 home: $4,760 in Michigan vs $7,520 in Illinois — about $2,760 apart.
Combined sales tax rates differ by 2.98 percentage points between the two states, which compounds over years of retirement spending.
Death taxes are a separate question from income tax — Michigan: No state estate or inheritance tax; Illinois: Estate tax (exemption ~$4M). A state can look income-tax friendly and still tax an estate or inheritance.
Why “$0 state tax” is not universal for either state
Michigan's $0 figure on this vignette depends on the sample's exact age and balance — a larger IRA or younger retiree can change the outcome.
Illinois's $0 figure on this vignette depends on the sample's exact age and balance — a larger IRA or younger retiree can change the outcome.
Rerun the required-withdrawal calculation with your own birth year and balance, then re-check each state's current retirement-income booklet before relocating.
Concepts to know for this comparison
Short definitions so the scoreboard numbers map to real retirement-tax rules.
Social Security state tax vs retirement-income tax
Two separate rules: whether the state taxes Social Security benefits, and whether it taxes traditional IRA/401(k)/pension withdrawals. A state can treat them very differently.
Required minimum distribution (RMD)
The IRS-mandated annual withdrawal from a traditional IRA once you reach RMD age, computed from the Uniform Lifetime Table. This sample's RMD is about $30,189.
Estate vs inheritance tax
Estate tax is levied on the decedent's estate; inheritance tax is levied on certain heirs. A state can have one, both, or neither — separate from its income-tax treatment of retirees.
Retiree-friendliness score
This site's structural score of Social Security, retirement-income, and estate/inheritance treatment. Lower score / lower rank number is more favorable on those axes — property and sales tax are shown as separate benchmarks.
Myths vs facts — Michigan vs Illinois
"No state income tax on Social Security means the state taxes nothing."
Not necessarily. Michigan can still tax a traditional IRA/401(k) withdrawal even where Social Security itself is exempt.
"Michigan is simply the better place to retire."
This ranking covers Social Security, retirement-income, and death-tax treatment on one fixed sample plus a property estimate. Housing, healthcare access, climate, and family proximity usually matter more to an actual move.
"An income-tax-friendly state has no death tax."
Not guaranteed. Michigan: No state estate or inheritance tax. Illinois: Estate tax (exemption ~$4M). Death taxes are a separate legal regime from income tax.
"Federal tax on Social Security disappears if I move to a tax-friendly state."
Federal taxation of benefits depends on your combined income under IRS rules, not your state of residence. Moving states can eliminate the state-level tax while leaving the federal worksheet unchanged.
Who this Michigan vs Illinois page helps
Useful if…
- •Soon-to-be retirees weighing a move between Michigan and Illinois.
- •Retirees approaching required-withdrawal age who want the state-tax layer on top of the federal rules.
- •Anyone comparing Social Security taxation separately from traditional retirement-account taxation.
- •Estate planners checking whether either state adds a death tax on top of income tax.
Use a fuller model if…
- •You need your own age, balance, and filing status — rerun the required-withdrawal calculator with your real numbers.
- •You need married filing jointly or multiple income sources modeled together.
- •You need county-level property tax or homestead/senior relief, not a statewide effective rate.
- •You need a full household budget including healthcare and housing costs, not just state tax treatment.
Common mistakes reading this pair
- Assuming a state that exempts Social Security also exempts IRA and 401(k) withdrawals.
- Ignoring estate or inheritance tax because the state looks friendly on income tax.
- Treating this fixed sample as your own tax bill instead of rerunning it with your age and balance.
- Forgetting that federal tax on benefits depends on combined income, not your state of residence.
- Skipping property and sales tax comparisons because the income-tax picture looked favorable.
Michigan vs Illinois checklist
Before treating this destination comparison as a retirement decision.
- 1Compare Social Security treatment first — Michigan: SS exempt from state tax; Illinois: SS exempt from state tax.
- 2Then compare traditional IRA/401(k) withdrawal treatment — it is a separate rule from Social Security.
- 3Check for a state death tax (No state estate or inheritance tax vs Estate tax (exemption ~$4M)) if wealth transfer matters to you.
- 4Compare the modeled property tax on your target home value — this sample uses $400,000.
- 5Rerun your own required withdrawal with your birth year and balance in the RMD calculator.
- 6Confirm the current state income-tax booklet before relocating — exclusions and caps change with legislation.
Michigan vs Illinois retiree tax FAQs
Michigan ranks higher on this list — #5 vs #10 of 15 curated destinations on the Social Security, retirement-income, and death-tax score.
SS exempt from state tax. Michigan does not tax Social Security benefits at the state level. Federal tax rules still apply.
SS exempt from state tax. Illinois does not tax Social Security benefits at the state level. Federal tax rules still apply.
Michigan: Retirement income exempt — Social Security exempt. For 2026, PA 4 of 2023 phase-in reaches 100%: deduct qualifying retirement/pension benefits up to the published maximum ($67,610 single / $135,220 MFJ per Michigan ORS FAQ — CPI-adjusted). Amounts above the cap remain taxable. Confirm Form MI-1040 / Form 4884 and RAB 2026-1. Illinois: Retirement income exempt — Pensions, IRA, 401(k), and Social Security are generally exempt from Illinois income tax.
On a single filer aged 73 with $30,000 of Social Security and a required withdrawal of about $30,189: Michigan — sample ss + rmd: $0 state tax (under mi deduction cap); Illinois — sample ss + rmd: $0 modeled state income tax. Federal tax on up to 85% of benefits can still apply in both.
Modeled property tax on the same $400,000 home: $4,760 in Michigan (1.19% effective) vs $7,520 in Illinois (1.88%). Combined sales rates are 6% and 8.98%.
Michigan: No state estate or inheritance tax. Illinois: Estate tax (exemption ~$4M). The federal estate exemption is about $15M per person in 2026.
No. The federal share of Social Security that is taxable depends on combined income under IRS Topic 423 and Publication 915 — about $45,189 for this sample, which puts up to 85% of benefits in play in either state.
This hub ranks 15 popular retirement destinations with a Social Security plus required-withdrawal sample household. For any of the 50 states and DC, use the retirement taxes by state map and its state profiles.
Your age, the size of your traditional balance, whether income is pension or investment based, and state exclusion caps. Rerun the required withdrawal for your own balance and birth year, then confirm the current state booklet.
Possibly. This vignette is fixed at age 73. Some states with age-based rules (for example a full deduction only at 65+) can tax the same benefit for a younger retiree with the same income. Confirm the age thresholds on each state's retirement-tax profile.
Michigan — Sample SS + RMD: $0 state tax (under MI deduction cap). Illinois — Sample SS + RMD: $0 modeled state income tax. Both are on the same ~$30,189 sample required withdrawal; federal tax on up to 85% of Social Security can still apply in either.
Both model $0 state income tax on the sample mix, so property tax ($2,760 apart on a $400,000 home) and sales tax (2.98-point gap) are what actually differ here.
Compare another destination pair
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15 curated retirement destinations, ranked on benefit and withdrawal treatment.
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Educational estimates for one fixed retiree, 2026 rules. Exclusion caps and thresholds change with legislation — confirm the current state booklet. Not tax advice.