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May 3, 2023

Michigan Department of Treasury will allow employers to withhold at new reduced tax rate for 2023

The Michigan Department of Treasury (Department) confirmed in frequently asked questions that revised withholding tables will not be published to reflect the 2023 reduction in the personal income tax rate from 4.25% to 4.05% that was announced earlier this year.

As to whether employers can withhold at the lower rate of 4.05% in the absence of updated 2023 withholding tables, the Department stated that employers have the option of continuing to withhold at 4.25% or refigure withholding calculations using the reduced rate of 4.05%.

The Department noted that if employers do not withhold at the lower rate of 4.05% in 2023, any excess withholding will be refunded when employees file their 2023 Michigan income tax returns.

As previously reported (see EY Tax Alert 2023-0670), on March 29, 2023, the Department announced that retroactive to January 1, 2023, the personal income tax rate was reduced from 4.25% to 4.05%.

This temporary tax cut is the result of legislation enacted in 2015 that requires, starting in 2023, a rate cut for any tax year that the general fund grows faster than the rate of inflation. Based on the state's fiscal year 2022 Annual Comprehensive Financial Report, which projects a $9.2 billion surplus for 2023, Michigan Attorney General Dana Nessel issued a legal opinion finding that the reduction applies for tax year 2023.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (
   • Kenneth Hausser (
   • Debera Salam (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor


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