Michigan residents to see income tax cut next year - here's how much residents will save

The Michigan treasury department has confirmed a tax cut triggered by the state's budget surplus will go into effect next year.

The income tax will decrease from 4.25% to 4.05%. According to the state treasurer Rachel Eubanks, it's the lowest income tax rate since 2007.

It'll amount to $650 million in money going back to Michigan residents - about $50 per taxpayer. "Michigan’s strong economic position has led to a reduction in the state income tax from 4.25% to 4.05% for 2023," Eubanks said in a statement. "When Michiganders file their 2023 state income taxes in 2024, they will see the rate adjustment in the form of less tax owed or a larger refund."

The tax cut is the result of a 2015 law that required the rate go into effect if Michigan's general fund grew faster than the rate of inflation beginning in 2023. The state's massive budget surplus left over from pandemic-era federal funds triggered the tax cut.

Earlier this week, the state attorney general said the cut was only temporary, a sentiment that was rejected by the Republicans who were in power at the time the bill passed.

"Our state is headed in the right direction, bolstered by low unemployment, projects bringing jobs and supply chains home, and fiscally responsible, bipartisan leadership that took us from a projected $3.5 billion deficit in 2020 to a $9.2 billion surplus this year, paid down $14 billion in debt, and brought the rainy-day fund to an all-time high," said Gov. Gretchen Whitmer in a statement.

The tax change will show up as going into effect on Jan. 1, 2023 when residents file their taxes next year. 

Despite the governor touting the tax cut, Whitmer and Michigan Democrats initially pushed to shift money out of the general fund to avoid triggering the tax cut. Whitmer had proposed sending "inflation relief checks" to residents instead, which would come to about $180.

RELATED: Michigan tax relief bill signed into law by Whitmer; here's who benefits

However, state Senate Democrats failed to secure enough votes from Republican senators to have made the change immediate. It's part of a bevy of legislation that Democrats have moved at lightning pace to enact.

The tax package that passed included potential savings for low-income families and seniors. Check out how much here.