Michigan Tax Changes 2026: A CPA Guide | HelloBooks Michigan PA 24 of 2025 creates state deductions for qualified tips and overtime for 2026 through 2028, mirroring the federal amounts. Not for 2025 returns.
Michigan matched the federal tips and overtime deductions, but starting a year later. The 2025 Michigan return gets nothing; 2026 through 2028 do.
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Tips and overtime deductions
2026 to 2028
Applies: Tax years 2026 to 2028From IRS.gov · checked October 10, 2026
Public Act 24 of 2025 amends MCL 206.30 to deduct qualified tips (IRC section 224) and qualified overtime compensation (IRC section 225), to the extent not already deducted in arriving at AGI. It applies to tax years beginning after December 31, 2025 and before January 1, 2029.
The Michigan amount generally mirrors the federal deduction. Residents deduct all qualified amounts claimed federally; nonresidents deduct only the part earned for services in Michigan.
The notice does not name a Michigan form line and says Treasury may update its guidance as federal rules develop. Wait for the 2026 MI-1040 instructions before you build the calculation into your software.
A nonresident who works in Michigan part of the year needs records of where the tipped or overtime hours were worked. Ask employers for that split now rather than in 2027. Michigan penalties are at /us/penalties/michigan.
The plain-English summary for business owners
Schedule 1-A · qualified tips
Schedule 1-A · qualified overtime
State returns · Indiana
General information for tax professionals, not advice on a specific return. Figures are from IRS.gov on the date shown; check the current IRS instructions before filing.
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