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FAQ
  Individual Income Tax
Is military pay exempt from Michigan income tax?
 
Answer:

As a Michigan resident, you are required to file a Michigan income tax return ( MI-1040 ) regardless of where your income is earned. Michigan does not tax active duty pay. However, most interest, dividends, most capital gains and other income received by a Michigan resident are subject to Michigan income tax. You should file a MI-1040 and a Michigan Schedule 1 as a Michigan resident and subtract your military pay to determine Michigan taxable income.