The following are subtractions from income that can be taken on your Michigan return:
Amount Included In MI-1040 Line 10 From Military Retirement Benefits Due To Service In The US Armed Forces Or Michigan National Guard Benefits
You may subtract the amount of military benefits from your Michigan return that was included in your federal adjusted gross income.
Income Attributable To Another State
Michigan residents cannot deduct wages, salaries, or other compensation earned outside of Michigan. However, they may be eligible for a credit for taxes paid to another state.
Business income that is taxed by another state and Michigan must be apportioned. You must include form MI-1040H. Income reported on the MI-4797 and carried to the MI-1040D is business income and is potentially subject to apportionment.
Capital gains from the sale of real property or tangible personal property that is located outside of Michigan must be adjusted.
If you have Federal Excess Business Loss Limitation, the program will automatically generate form MI-461 based on your entries in the program. You will review the instructions on this form to determine if any amount may be subtracted.
Military Pay Included on MI-1040, line 10
Income received from Active duty military pay from the U.S. Armed Forces can be deducted. Enter only the taxable portion of social security and military pay that is included on your Federal 1040.
NOTE: Income received from the U.S Public Health Service, contracted employee pay and civilian pay are not considered military pay.
Income While A Resident Of A Renaissance Zone
If you were a full-year resident of a Renaissance Zone, you can subtract all earned income or received income. If you resided in a Zone for at least 183 consecutive days during 2024, you can subtract the portion you earned while a you were a resident of the Zone. Unearned income, such as capital gains, may need to be prorated. To be eligible you must meet all of the following requirements:
- Be a permanent resident of a Renaissance Zone prior to January 1, 2012, for at least 183 consecutive days.
- Your local assessor’s office must approve your eligibility.
- Not be behind on any local or state taxes the Renaissance Zone Act has abated.
- File a Michigan income tax return each year.
- Must have $1 million or less of gross income.
Michigan Income Tax Refund
You can subtract your Michigan State Income tax refund and Homestead Property Tax Credit refund that were included as income in your federal adjusted gross income.
If you did not itemize on your Federal return for the prior year, your prior year refunds should not be included in your adjusted gross income and should not be subtracted from your income.
If you are a farmer, subtract the amount that your state or city income tax refund and Homestead Property Tax Credit exceeds the business portion of your Homestead Property Tax Credit.
Michigan First-Time Home Buyer Savings Program
An individual may open a first-time home buyer savings account with any financial institution authorized to do business in Michigan; the account may be used for the payment or reimbursement of eligible costs for the purchase of a single-family residence in Michigan by a qualified beneficiary designated on the account. The savings account may be opened beginning January 1, 2022, through December 31, 2026. You can claim the deduction on withdrawals made from the same account up to a total deduction of $5,000 on a single return or $10,000 for a jointly filed return, to the extent not deducted in determining adjusted gross income (AGI).
Michigan Education Savings Program (MESP)
You may subtract the amount of contributions made to MESP, MiABLE or MAP accounts by the taxpayer, not subtracted when calculating the AGI. The subtraction may not be more than $10,000 for a single return or $20,000 for a joint return. The State of Michigan only permits the subtraction for contributions to 529 programs in Michigan.
Michigan Education Trust (MET)
You may subtract the entire contract amount and any fees required for a MET 529 prepaid tuition contract. Charitable contributions made to the MET Charitable Tuition Program can also be subtracted.
Oil And Gas Gross Income Included In AGI
You may deduct the gross income that is subject to Michigan severance tax from the Michigan Productions of oil and gas or nonferrous metallic minerals up to the amount included in your AGI.
MRTMA/Marihuana Expense Subtraction
Include ordinary and necessary expenses not deducted in determining AGI and for carrying out a trade or business licensed as a recreational marihuana establishment under the Michigan Regulation and Taxation of Marihuana Act (MRTMA).
Resident Tribal Member Income Exempted Under A State Tribal Tax Agreement
A member of a federally recognized Indian tribe that has an active tax agreement with the State of Michigan may subtract certain income from wages, interest or pension income that is included in their AGI.
Michigan income earned while living outside of your Agreement Area or Indian Country may not be subtracted from your Michigan adjusted gross income.
Deductions For Taxpayers Based on Birth Year
A recipient born between January 1, 1946 and January 1, 1963 or is retired as of January 1, 2013 and born after December 31, 1952, who receives, or whose spouse receives (If filing a joint return), retirement or pension benefits from employment with a governmental agency that was not covered by the federal SSA; is entitled to a greater retirement deduction.
A taxpayer born prior to 1946 (or the surviving spouse who has not remarried of a decedent born prior to 1946 who also died after reaching age 65) may subtract interest, dividends, and capital gains included in the adjusted gross income. The subtraction is limited to a maximum of $14,274 on a single return or $28,548 on a joint return, which must be reduced by any deduction for Military retirement benefits, Railroad retirement benefits, Public and private retirement and pension benefits, as well as any amount claimed for the federal credit for the elderly and totally and permanently disabled as a subtraction.
Social Security and Railroad Retirement Benefits
You may subtract only the taxable portion of Social Security and Railroad benefits (Tier 1 and 2) that is included in your federal adjusted gross income.
NOTE: Michigan compensation earned while living outside of your agreement area may not be deducted from your Michigan AGI.
Michigan Net Operating Loss Deduction
You can only subtract your Michigan NOL. Your Michigan NOL carryforward entered as a subtraction must be reduced by the domestic production activities deduction and the excess capital loss deduction attributable to Michigan that was used to arrive at your prior year AGI (see MI-1045 instructions).
Interest on U.S. Savings Bonds and Treasury Obligations
You can subtract income from U.S. government obligations (e.g., Series EE bonds, Treasury notes) including any income from U.S government obligations that were received through a partnership, S corporation, or any other pass-through entity.
To subtract this income from within the program, go to:
- Federal Section
- Income
- 1099-DIV, INT, OID
- Interest or Dividend Income
- Amount of Interest on U.S. Savings Bonds and Treasury Obligations that you want subtracted from your state return
Program Entry
To enter your Michigan subtractions from income, please go to:
- State Section
- Michigan Return
- Edit
- Subtractions from Income
Further Information
For additional information pertaining to Michigan Subtractions from Income, please click here.