Is military pay exempt from Michigan income tax?

As a Michigan resident, you are required to file a Michigan income tax return MI-1040, regardless of where your income is earned. Military pay is exempt from Michigan tax. However, most interest, dividends, capital gains and other income received is subject to Michigan income tax. You should file an MI-1040, Schedule 1 and Schedule W and subtract your military pay, to the extent it is included in federal adjusted gross income (AGI).