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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Illinois VS COUNTRY B Michigan

Side-by-side analysis of income tax, effective rates, and take-home pay for Illinois and Michigan in 2026.

Daniel · CountryTaxCalc Updated June 2026 Tax Comparison 2026
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OVERVIEW
Both Illinois and Michigan are Great Lakes states with flat income tax rates, but the details diverge sharply. Illinois charges 4.95% state income tax with a modest $2,425 personal exemption — and has the second-highest property taxes in the US at 2.23% effective rate. Michigan charges 4.05% with a $5,600 exemption, but Detroit residents pay an additional 2.4% city income tax. For a $100,000 earner outside Detroit, Michigan saves roughly $1,007/year on income tax alone. Add Illinois's property tax premium and the gap widens further for homeowners. Chicago's combined sales tax of ~10.25% also stands out — Michigan's flat 6% with no local additions is far simpler. Michigan wins on total tax burden for most residents; Illinois wins only if you live and work outside Cook County and avoid property ownership.
Section 01

The Big Picture

Top-line rates and effective take-home for a typical earner — including income tax, social contributions, and applicable surcharges.
🏙️
COUNTRY A
Illinois
TAX RATE
4.95%
Flat Rate, High Property Tax
Flat 4.95% with $2,425 personal exemption; no city income tax
🚗
COUNTRY B
Michigan
TAX RATE
4.05%
Lower Rate + City Taxes in Detroit
Flat 4.05% with $5,600 personal exemption; Detroit adds 2.4% city tax
TYPICAL ANNUAL DIFFERENCE
Moving from Michigan → Illinois at $100,000
$1,007
That's $84/month back in your pocket
Section 02

Tax Savings by Income Level

Net take-home after all income tax, social contributions, and surcharges — for a single employee with no dependents.
GROSS INCOME
🏙️ IL TAX
🚗 MI TAX
SAVINGS
10-YEAR
$75,000
$3,592
$2,811
$781
$7,810
$100,000
$4,830
$3,823
$1,007
$10,070
$150,000
$7,305
$5,848
$1,457
$14,570
💡

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🏙️

Illinois Pros & Cons

+ PROS
  • No city income tax statewide
  • Chicago — world-class city amenities
  • Flat rate is simple and predictable
  • Social Security fully exempt
− CONS
  • Second-highest property taxes in US (2.23%)
  • Higher income tax rate (4.95% vs 4.05%)
  • Chicago combined sales tax ~10.25%
  • Grocery items taxed at 1% state rate
🚗

Michigan Pros & Cons

+ PROS
  • Lower flat income tax rate (4.05%)
  • Higher personal exemption ($5,600)
  • Lower property taxes (1.54% average)
  • Clean 6% sales tax — no local additions; groceries exempt
− CONS
  • Detroit residents pay 2.4% city income tax on top of state
  • Many other Michigan cities charge 1%–1.5% city tax
  • Social Security partially taxable for those born 1953 or later
  • Rust Belt economy limits high-income job options outside Detroit/Ann Arbor
FAQ

Frequently Asked Questions

Which state has lower income taxes — Illinois or Michigan?

Michigan has a lower state income tax rate: 4.05% flat with a $5,600 personal exemption, versus Illinois at 4.95% with only a $2,425 exemption. At $100,000 income, a Michigan resident outside Detroit pays approximately $3,823 in state income tax compared to $4,830 in Illinois — a saving of about $1,007 per year. However, Michigan residents in Detroit or other cities with local income taxes must add 1%–2.4% on top of the state rate.

Does Michigan have a city income tax?

Yes. Detroit levies 2.4% city income tax on residents and 1.2% on non-residents who work in the city. Other Michigan cities including Grand Rapids, Flint, Lansing, and Pontiac charge between 1% and 1.5% for residents. If you live and work in Detroit, your combined Michigan tax burden at $100,000 income is approximately $6,103 (state plus city) — which is higher than Illinois's $4,830. Illinois has no city income tax on wages.

How do property taxes compare between Illinois and Michigan?

Illinois has the second-highest property taxes in the United States, averaging an effective rate of about 2.23%. Cook County, which includes Chicago, is particularly high. Michigan averages approximately 1.54% effective rate. On a $300,000 home, that difference amounts to roughly $2,070 per year ($6,690 in Illinois vs $4,620 in Michigan). For homeowners, this gap is often larger than the income tax difference and can dominate the total tax burden comparison.

What is the sales tax rate in Illinois vs Michigan?

Illinois charges 6.25% state sales tax, but local governments add more — Chicago's combined rate reaches approximately 10.25%. Groceries are taxed at a reduced 1% state rate in Illinois (not exempt). Michigan charges a flat 6% sales tax statewide with no local additions permitted, and groceries are fully exempt. For everyday spending, Michigan is significantly cheaper and simpler.

Are Social Security benefits taxed differently in each state?

Yes. Illinois fully exempts Social Security benefits from state income tax — retirees pay no Illinois income tax on Social Security. Michigan applies birth-year rules: residents born before 1946 are fully exempt; those born 1946–1952 may deduct a portion; those born 1953 or later can deduct limited amounts but most Social Security income is taxable at the state rate. Retirees may prefer Illinois for this reason, unless property taxes on their home tip the balance.

At $100,000 income, who wins — Illinois or Michigan (outside Detroit)?

Michigan wins clearly for renters. State income tax: Illinois $4,830 vs Michigan $3,823 — Michigan saves $1,007/year. If you own a home, add property taxes: on a $300,000 home, Illinois costs roughly $2,070 more per year. Combined, a Michigan resident outside Detroit with a $300,000 home saves approximately $3,077/year compared to the same Illinois resident. That is $257/month or $30,770 over a decade.

Is Illinois or Michigan better for retirees?

It depends heavily on whether you own property. Illinois fully exempts Social Security and most retirement income (pensions, 401(k) distributions) from state tax — one of the most retiree-friendly income tax structures in the country. However, Illinois's 2.23% property tax rate can cost $4,000–$8,000+ per year on a typical home. Michigan partially taxes Social Security (for those born after 1952) but has lower property taxes. Retirees who rent or own modest homes may favor Illinois; those with large homes or who rely heavily on Social Security may favor Michigan.

What is the effective tax rate for Illinois vs Michigan at different income levels?

At $75,000: Illinois effective rate is 4.79% ($3,592) vs Michigan 3.75% ($2,811). At $100,000: Illinois 4.83% ($4,830) vs Michigan 3.82% ($3,823). At $150,000: Illinois 4.87% ($7,305) vs Michigan 3.90% ($5,848). Both states use flat rates so effective rates rise only slightly with income (due to the fixed personal exemption becoming a smaller proportion of income). Michigan consistently runs about 1 percentage point lower in effective rate across all income levels.
From the brief
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