Michigan individual and business income tax updates for 2023
During the spring of 2023 the state of Michigan passed legislation that will have an impact on your 2023
Michigan individual and business income tax returns.
Here are the keys points to be aware of:
Individual: www.michigan.gov/taxes/iit
- The Michigan individual income tax rate decreases from 4.25% to 4.05% for tax year 2023 only.
- Retirement and pension benefits “rollback”:
a. The state currently provides allowable subtractions from gross income for qualified
retirement benefits based on a tier structure system depending on the taxpayer’s birth
year.
b. For tax year 2023 (and beyond), the taxpayer will have the option to choose the most
favorable allowable subtraction between the existing tier structure system, and new
phase-in subtraction or qualified fire, police, and corrections retiree subtraction. The
added complexity may require additional tax planning and consulting. Ensure you
discuss the source of your benefit distribution with your tax preparer to receive the
most favorable benefit. - The Michigan earned income credit expands from a maximum of 6% of the federal credit to
30%.
Business www.michigan.gov/taxes/business-taxes
- Delivery and Installation Charges: Beginning April, 26, 2023 most delivery and installation
charges are not subject to sales and use tax. The act stipulates that the seller must separately
itemize delivery and installation charges and keeps books and records that show how the tax is
levied. - Withholding on updated income tax rate: Withholding tables will not be updated to reflect the
2023 reduced income tax rate of 4.05%. Businesses may choose to continue withholding at
4.25% or refigure withholding calculations using the reduced 2023 income tax rate of 4.05%. If
withholding amounts are not adjusted, employees will receive the adjustment when filing their
Michigan income tax return, via a larger refund or less tax owed.
At Kroon & Mitchell we believe in an integrated approach to tax and investment. Any investment strategy has tax implications. We customize our approach based on your needs and financial goals. Contact us for a free consultation.
