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Michigan Department of Treasury - City Tax Administration; 5469 (Rev. 09-22)
2023 City of Detroit Income Tax Withholding Guide
Example: A nonresident employee who is subject to withholding
Who Must Withhold?
on 60% of their earnings, because 60% of their work is performed
Every employer that has a location in the City of Detroit, or is in the City of Detroit, is also subject to withholding on 60% of
doing business in the City of Detroit, even if it has no location their vacation, holiday, sick pay, severance pay, bonus pay or wage
in the City of Detroit, is required to withhold income tax from payments during periods of sickness.
its employees. An employer is any individual, partnership,
association, corporation, non-profit organization, governmental Payments Not Subject to Withholding
body or unit or agency, or any other entity that employs one or
Withholding does not apply to:
more persons on a salary, bonus, wage, commission or other basis
whether or not the employer is a business. • Wages paid to domestic help;
• Fees paid to independent contractors who are not employees;
For example: • Payment to a nonresident employee for work or services
○ A construction firm from Ohio doing work in the City performed in the City of Detroit, if the predominant place of
of Detroit is required to withhold income tax from its employment is not the City of Detroit;
employees. • Payment to a nonresident employee for work or services
○ An employer that has locations both in and out of the rendered outside the City of Detroit;
City of Detroit must withhold income tax from all employees • Pensions and annuities, worker’s compensation and similar
working in the City of Detroit, and from all City of Detroit benefits;
resident employees working in or out of the City of Detroit. • Amounts paid for sickness, personal injury or disability (so
○ A non-profit organization in the City of Detroit is required called excludable sick pay) to the same extent that these amounts
to withhold income tax from its employees (although it is not are exempt from federal income tax, but the employer must
engaging in business activity in the usual sense). withhold from such payments if federal tax is withheld;
○ Employers that are not required to withhold City of • Amounts paid to an employee as reimbursement for expenses
Detroit income tax may register and withhold for the incurred in performing services.
convenience of their City of Detroit resident employees.
An individual with income described in the first three bullets
Convenience withholders must comply with the registration
above is not subject to withholding on such income. The
and filing requirements outlined in these instructions.
individual is nevertheless required to file an annual return and
NOTE: Employers withholding City income tax are required to report such income if the individual is a City of Detroit resident, or
file the City of Detroit Income Tax Withholding Monthly/Quarterly is a nonresident earning such income in the City of Detroit.
Return (Form 5323) either monthly ($1,200 or more withheld per
year) or quarterly ($1,199 or less withheld per year) AND the City Employee’s Withholding Exemption Certification
of Detroit Income Tax Withholding Annual Reconciliation (Form for the City of Detroit (DW-4), Form 5527
5321). To determine each employee’s place of residence and predominant
place of employment, an employer must have each employee fill
Employees Who are Subject to Withholding
out an Employee’s Withholding Exemption Certificate for the City
An employer either required to withhold or voluntarily registered of Detroit (DW-4), Form 5527. Only one Form 5527 is required
for withholding must withhold on compensation paid to the for each employee, even though the employee may be subject to
following employees: withholding for two cities.
• All residents of the City of Detroit whether or not they work When properly filled out, Form 5527 provides the employee’s
inside the City of Detroit; and city of residence and the two cities or communities in which the
• All nonresidents of the City of Detroit who have the City of employee earns the greatest percentage of compensation from the
Detroit as their predominant place of employment (see below). employer. Most employees will only have one city of employment
An employee is anyone from whom an employer withholds either and will check the 81%-100% field as the percentage of
federal income tax or social security tax. compensation earned in that city. Form 5527 is also the employee’s
statement of the number of dependency exemptions claimed.
Compensation Subject to Withholding If an employee fails or refuses to complete Form 5527 upon the
City of Detroit income tax must be withheld from: request of the employer, tax shall be withheld from the employee’s
• All compensation (salaries, wages, commissions, severance compensation at the resident tax rate without any consideration of
pay, bonuses, etc.) of a City of Detroit resident for services exemptions.
rendered or work performed regardless of whether such services or Do not mail Form 5527 to the city or the Michigan Department
work are performed in or out of the city; and of Treasury; these are for the employer’s use and must be retained
• All compensation of a nonresident for services rendered or in the employer’s files.
work performed in the City of Detroit where the City of Detroit is
the predominant place of employment. Income Tax Rates
Vacation, holiday, sick, severance and bonus pay to nonresidents The City of Detroit income tax rate for residents is 2.4% (multiply
who perform part but not all of their work or services in the City by 0.024). The City of Detroit income tax rate for nonresidents is
of Detroit are taxable in the same ratio as their normal activities. 1.2% (multiply by 0.012).
These instructions are interpretations of the Detroit Income Tax Ordinance. The Detroit Income Tax Ordinance will prevail in
any disagreements between the instructions and the Detroit Income Tax Ordinance.
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