Michigan Business Taxes at a Glance
Michigan combines a flat state income tax with city income taxes in about two dozen cities, including Detroit, Grand Rapids, and Lansing. Corporations pay a separate corporate income tax, pass-through businesses can elect an entity-level tax, and sales tax is a single statewide rate. BOMCAS helps Michigan individuals and businesses keep these filings coordinated.
State Individual Income Tax
Michigan taxes individual income at a flat rate, starting from federal adjusted gross income with Michigan adjustments. One of the biggest recent changes concerns retirement income. Michigan has been phasing in a larger deduction for pension and retirement income, which affects retirees and people planning to retire.
Michigan has reciprocal agreements with several neighboring states, including Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. Residents of those states who work in Michigan generally pay income tax to their home state on wages, with the right exemption form. We prepare Michigan returns, apply retirement deductions, and handle reciprocity and part-year filings.
City Income Taxes
About two dozen Michigan cities levy their own income tax. Residents pay one rate, and nonresidents who work in the city pay a lower rate on income earned there. Detroit has the highest rates, and Detroit's city return is administered by the state Treasury. Other cities administer their own taxes.
City tax raises practical questions:
- Employees who live in one taxing city and work in another
- Remote and hybrid workers, where nonresident tax depends on days actually worked in the city
- Businesses with operations in a taxing city, which may owe city corporate or business income tax
- Part-year residents who moved in or out during the year
We prepare city returns, allocate wages based on work location records, and set up employer withholding for each city.
Corporate Income Tax
C corporations and other entities taxed as corporations pay Michigan's Corporate Income Tax on apportioned business income, with a filing threshold based on gross receipts. Michigan uses unitary combined reporting for related companies and a single sales factor. Insurance companies and financial institutions are taxed differently. We prepare the returns, compute unitary groups, and source receipts.
Flow-Through Entity Tax
Michigan's flow-through entity tax lets partnerships, S corporations, and LLCs taxed as either elect to pay tax at the entity level, with a refundable credit for owners on their Michigan returns. The election is made for a set period, and estimated payments are required. Whether it helps depends on the owners, their residency, and their federal situation. We evaluate the election and manage payments and credits.
Sales and Use Tax With No Local Taxes
Michigan's sales and use tax has one statewide rate, and local governments do not add their own sales taxes. That makes rate management simpler than in most states. But use tax still matters, especially for businesses buying equipment from out-of-state vendors. Michigan also taxes certain telecommunications and accommodations under use tax. We register businesses, prepare returns, and review purchases for use tax.
Property Tax and Business Personal Property
Michigan property tax is assessed locally. Homeowners claim a principal residence exemption from school operating taxes for their primary home. Businesses with personal property below a set value can claim the small business property tax exemption by filing an affidavit each year. Larger businesses and manufacturers have separate exemptions and reporting. We keep asset records that support these filings and federal depreciation.
Winter Residents and the Principal Residence Exemption
Many Michigan retirees spend winters in Florida or Arizona. Which state is your home for income tax depends on your domicile, not just where you spend the most days. The two states' homestead rules also interact: a Michigan principal residence exemption generally cannot be claimed while you claim a similar homestead exemption or credit in another state. Choosing which home is your principal residence affects income tax filings, property tax, and estate planning. We help clients document their domicile and file the right returns in each state.
Payroll and Earned Sick Time
Michigan payroll includes state income tax withholding, city income tax withholding for employees who live or work in taxing cities, and unemployment insurance reporting to the Unemployment Insurance Agency. Michigan's Earned Sick Time Act took effect in 2025, which requires employers to track and provide paid sick time, with different rules for small businesses. We run payroll, track sick time accruals, file quarterly reports, and reconcile them to the books.
Auto Suppliers, Health Care, Cannabis, and Up North Tourism
- Automotive and manufacturing suppliers: inventory, fixed assets, and multistate apportionment
- Health care: practices with staff in several cities
- Agriculture and food processing: farm reporting and sales tax exemptions
- Cannabis: separate excise and wholesale taxes and limits on federal deductions
- Tourism in northern Michigan: seasonal payroll and accommodations taxes
Bookkeeping for Michigan Businesses
Michigan bookkeeping needs to track employee work locations for city tax, gross receipts for the CIT threshold, and asset values for property tax exemptions. We set up books to provide these figures and close each month with reconciled accounts.
Talk to BOMCAS About Michigan
Employers with staff in Detroit and other taxing cities, owners weighing the flow-through entity tax, and retirees splitting the year between Michigan and the Sun Belt can contact BOMCAS for a remote review. Over time, this section will hold pages for specific Michigan cities and services. Return to the BOMCAS home page or our United States services. This page is a general summary only.
Talk to BOMCAS About Your Michigan Taxes
Have a question about your Michigan filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.