When Michigan replaced the Michigan Business Tax with the Corporate Income Tax (CIT) in 2012, most state-level business tax credits disappeared. Many business owners drew a reasonable conclusion: Michigan's incentive landscape wasn't worth paying attention to.
That assumption is no longer accurate, especially heading into the second half of 2026.
Michigan now offers a meaningful set of credits, exemptions, and economic development programs. In our experience working with Michigan businesses, these opportunities are frequently missed. Not because they don't apply, but because the filing deadlines are strict, the eligibility rules are specific, and no one flagged them in time. Below, we walk through the key programs available in 2026 and what you need to know to capture them.
Michigan's CIT imposes a flat 6% rate on C corporations and entities taxed as corporations federally. Qualifying small businesses, however, may elect the Small Business Alternative Credit, which reduces the effective rate to 1.8% of adjusted business income, a substantial difference.
To qualify under MCL 206.671, a business must meet all of the following:
Gross receipts of $20 million or less Adjusted business income of $1.3 million or less (indexed annually to the Detroit Consumer Price Index) No officer or shareholder receiving more than $180,000 in compensation, or in combined compensation and share of business income
The credit phases down as businesses approach those thresholds, so it's worth calculating even if you're close to the limits.
We regularly help Michigan business owners determine whether they qualify, particularly where entity structure creates confusion. One point worth clarifying: many professional service businesses, including medical practices, law firms, and consulting businesses, operate as pass-through entities (S corporations, partnerships, or LLCs) rather than C corporations. Those entities are subject to Michigan's Flow-Through Entity Tax, not the CIT, and the Small Business Alternative Credit does not apply to them.
There's also an important 2026 planning note: Michigan enacted HB 4961 in October 2025, decoupling from five federal provisions of the One Big Beautiful Bill Act. The state will not follow the OBBBA's treatment of R&D amortization under IRC Section 174A, the restoration of 100% bonus depreciation under Section 168(k), the expanded depreciation for qualified production property under Section 168(n), the increased Section 179 expensing limit, or the more favorable business interest deduction rules under Section 163(j). Business owners should not assume favorable federal tax treatment automatically carries over to Michigan — particularly those in manufacturing, technology, or other capital-intensive industries where these provisions have the largest impact.
Key Takeaway: If your business is a C corporation with gross receipts under $20 million and modest owner compensation, this credit can cut your Michigan tax rate by more than two-thirds. The compensation thresholds require careful analysis; this is one of the first things we review with new Michigan clients.
This is one of the most significant state-level opportunities we are currently seeing across Michigan businesses. Signed into law in early 2025, Michigan's refundable R&D tax credit is available for tax years beginning on or after January 1, 2025, and applies to both CIT filers and flow-through entities subject to Michigan withholding tax.
The credit is structured by business size:
Small businesses (fewer than 250 employees): 3% of qualifying R&D expenses up to a base amount, and 15% above it, capped at $250,000 Larger businesses (250+ employees): 3% up to the base amount and 10% above it, capped at $2,000,000
Crucially, the credit is refundable: if it exceeds your Michigan tax liability, you receive the excess as a refund.
Qualifying activities must occur in Michigan and meet standards similar to the federal R&D credit under IRC Section 41, covering basic research, applied research, and experimental development. Businesses already claiming the federal R&D credit are well-positioned, since much of the expense documentation carries over.
The program has a statewide annual cap of $100 million, with $25 million reserved for small businesses. If aggregate claims exceed the cap, credits are prorated, making accurate filing important.
The deadline for 2025 expenses has passed: Tentative claims for 2025 tax year expenses were due to the Michigan Department of Treasury by April 1, 2026. If you filed a tentative claim, the next step is to wait for Treasury's proration notice and then report the finalized credit on your annual return. If you missed the deadline, there is no remedy — Treasury does not accept late submissions under any circumstances. However, the credit is ongoing, and you can begin preparing now for the 2026 expense year. The tentative claim deadline for 2026 expenses is March 15, 2027, with the filing window opening January 1, 2027. Claims must be submitted through Michigan Treasury Online.
We are working with Michigan clients, including manufacturers in West Michigan and life sciences businesses in Southeast Michigan, on both finalizing their 2025 claims and building the documentation needed for 2026. If you believe your business conducts qualifying R&D activities, the time to start tracking expenses and establishing your base amount is now — not next January.
In late March 2026, Treasury released Revenue Administrative Bulletin 2026-4, which provides comprehensive guidance on eligibility, expense calculations, and the two-step filing process. For a deeper look at what the RAB means for your business, see our detailed guide to [Michigan's R&D Tax Credit].
Key Takeaway: If you missed the April 1, 2026 deadline for 2025 expenses, the priority now is getting set up for 2026. The March 15, 2027 deadline will arrive quickly, and proper expense tracking needs to start immediately. If you did file for 2025, watch for Treasury's proration notice to finalize your credit.
The Michigan Economic Development Corporation (MEDC) administers competitive programs for businesses making significant investments in Michigan. These are performance-based and discretionary, not automatic tax deductions, but they can be material for businesses planning expansions, relocations, or facility redevelopments.
The MBDP provides grants, loans, or economic assistance for projects involving capital investment and job creation. Generally, projects must create at least 50 new jobs (25 in rural counties with populations of 90,000 or less, or fewer for Innovation Industry projects). Awards are tied to performance milestones and reviewed by the Michigan Strategic Fund board.
For most small professional service businesses, the job thresholds place this program out of reach. But for businesses in manufacturing, healthcare services, technology, or distribution that are considering meaningful Michigan growth, it's worth a conversation early, before a site or structure is finalized. We regularly help clients coordinate with the MEDC before projects are locked in, which is the only point at which these programs can realistically be captured.
Michigan's Brownfield TIF program supports the redevelopment of contaminated, blighted, functionally obsolete, or historic properties. Property taxes are frozen at pre-redevelopment levels, and the incremental increase in value generated by the project is captured and used to reimburse eligible costs including environmental cleanup, demolition, site preparation, and infrastructure improvements.
For large-scale, mixed-use developments, Transformational Brownfield Plans can also capture income, withholding, and sales tax revenues. Approvals involve local brownfield redevelopment authorities, county bodies, and in some cases the Michigan Strategic Fund. More information is available through the MEDC's incentives portal.
Key Takeaway: MEDC programs cannot be applied for retroactively. Businesses considering significant investment in Michigan should engage the MEDC early and ideally with an advisor who understands the application process.
Michigan offers several property tax exemptions that can meaningfully reduce costs for qualifying businesses. Each has firm annual deadlines — missing them forfeits the exemption for that year with no exception.
Small Business Personal Property Tax Exemption: Businesses with a combined True Cash Value of personal property under $80,000 within a local tax collecting unit may qualify for a full exemption. File Form 5076 with the local assessor by February 20 each year.
Eligible Manufacturing Personal Property (EMPP) Exemption: Personal property used more than 50% of the time in or supporting manufacturing processes is exempt from local property tax. Qualifying businesses pay the State Essential Services Assessment instead, generally a lower burden. First-time claimants or those with changed circumstances must file Form 5278 by February 20.
Industrial Facilities Exemption (PA 198 of 1974): Manufacturers and high-technology businesses may qualify for up to a 50% reduction in local property taxes on new investments, for periods of 1–12 years. Applications are filed with the local unit of government and subject to review by the Michigan Department of Treasury and the MEDC. Approved businesses may also be eligible for a separate abatement of Michigan's 6-mill State Education Tax on qualifying new investment.
Key Takeaway: The February 20 filing deadlines for personal property exemptions are firm — we typically flag these for Michigan clients well in advance, because missing them is both costly and entirely avoidable. For 2026, these deadlines have already passed; mark your calendar now for February 20, 2027.
Michigan's incentive landscape rewards business owners who plan ahead. Based on what we're seeing with clients, here are the immediate priorities:
Now through year-end 2026: Begin tracking qualifying R&D expenses for the 2026 tax year. Establish your base amount calculation and ensure you can separate Michigan-specific activity from non-Michigan activity. The tentative claim window opens January 1, 2027 and closes March 15, 2027.
If you filed a 2025 R&D tentative claim: Watch for Treasury's proration notice, expected before the April 30 annual return deadline for calendar-year CIT filers. Once published, report your finalized credit on your annual return.
Ongoing: Review entity structure to confirm CIT vs. Flow-Through Entity Tax classification, and assess Small Business Alternative Credit eligibility. Account for Michigan's OBBBA decoupling in your state tax projections.
Before February 20, 2027: Confirm personal property tax exemption filings (Forms 5076 and 5278).
Before committing to a Michigan investment: Engage the MEDC early to explore MBDP or brownfield incentives.
For a broader look at tax strategy for business owners, see our tax planning services. And for year-end moves that can reduce your overall tax burden, check out our guide to year-end tax planning.
At Revonary, we work with business owners across Michigan, New York, and the broader Northeast to identify and capture state-level tax credits and incentives that are too often left on the table. Whether you're building documentation for a 2026 R&D claim, evaluating eligibility for the Small Business Alternative Credit, or assessing a Michigan expansion, our tax and consulting teams bring the expertise to help you navigate these opportunities with confidence.
If you operate in Michigan and want to make sure you're not missing anything, contact us today — we'd be glad to walk through your eligibility.
This article is for general informational purposes only and does not constitute legal or tax advice. Tax laws and program details are subject to change. Please consult a qualified tax professional regarding your specific circumstances.