Add Michigan qualified tips and overtime deductions (PA 24 of 2025)#8994
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Public Act 24 of 2025 (HB 4961, signed by Gov. Whitmer 2025-10-07) amends MCL 206.30 to incorporate the federal IRC section 224 (qualified tips) and 225 (qualified overtime compensation) deductions into Michigan taxable income for tax years 2026-2028 only (expressly not 2025). Michigan starts from federal AGI, and the federal tips/overtime deductions sit below AGI, so Michigan does not inherit them automatically. This adds mi_qualified_tips_deduction and mi_qualified_overtime_deduction (each mirroring the federal deduction, gated to 2026-2028 via an in_effect parameter) to the Michigan subtractions list. Co-Authored-By: Claude Opus 4.8 <noreply@anthropic.com>
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Adds Michigan's TY2026–2028 deductions for qualified tips and overtime — a gap surfaced by the 2026 state-session sweep.
Change
Public Act 24 of 2025 (HB 4961, signed by Gov. Whitmer 2025-10-07) amends MCL 206.30 to incorporate the federal IRC §224 (qualified tips) and §225 (qualified overtime compensation) deductions into Michigan taxable income, for tax years 2026, 2027, and 2028 only (expressly not 2025, even though the federal deductions began in 2025).
Per the MI Treasury notice: the Michigan deduction "should generally mirror the deduction taken on the taxpayer's federal return for that same tax year."
Why a state-specific variable is needed
Michigan computes taxable income from federal AGI (
mi_taxable_income = AGI + additions − subtractions − exemptions). The federal tips/overtime deductions sit below AGI, so MI does not inherit them — PA 24 creates explicit MI deductions. This mirrors the existing Indiana OBBBA-conformity pattern.Implementation
mi_qualified_tips_deduction— mirrors federaltip_income_deductionmi_qualified_overtime_deduction— mirrors federalovertime_income_deductiongov.states.mi.tax.income.deductions.qualified_tips_and_overtime.in_effectsubtractionslist from 2026mi_subtractionsVerified against the enacted PA 24 / MI Treasury guidance (not a proposal — signed 2025-10-07).
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