Michigan Subtractions: Understanding What You Can Deduct
When filing your Michigan individual income tax return, you may be eligible to claim various subtractions that reduce your taxable income. These subtractions are reported on Schedule 1 of your Michigan return (Form MI-1040) and are designed to adjust your federal income for Michigan-specific tax rules.
Common Michigan Subtractions
- Refunds and Credits: You can subtract certain refunds, such as state and local tax refunds, from your Michigan taxable income. These are reported on Form 6072 or Form 6074, and the total is carried to Schedule 1, line 16.
- State and Local Taxes Deducted: If you deducted state and local taxes on your federal return, you may add them back as an addition to your Michigan income. This is reported on Form 6072 or 6074 and carried to Schedule 1, line 2.
- FTE Credits: If you are a member of a flow-through entity that elected to pay Michigan FTE tax, you may claim a credit. The total FTE credit is calculated on Form 6072 or 6074 and carried to MI-1040, line 30.
- Business Property Gains/Losses: For gains or losses from the sale of business property, use Form MI-4797. Enter federal gains/losses in column D and Michigan taxable portion in column E. These are reported on Schedule 1, line 13 or line 4 depending on whether the amount is positive or negative.
- Out-of-State Losses: Losses from property located outside Michigan cannot reduce Michigan taxable income. These are reported on Schedule NR, and any negative amount is entered as a positive on Schedule 1, line 4.
Important Notes
Always ensure you are using the correct forms for your situation. For example, if you are part of an electing flow-through entity that files a composite return (Form 807), do not report the subtraction on Schedule 1 — it should be reported on the composite return.
If you need to recompute your Michigan income subject to tax, use Form 5674. Enter your share of AGI, additions, and subtractions as instructed to determine your adjusted Michigan income.
For capital gains and losses, use MI-8949 or MI-1040D if you are adjusting under Section 271 of the Michigan Income Tax Act. Report the portion of federal gain or loss subject to Michigan tax in column E.
Source:
Form 6072 - Michigan Schedule FTE
Form 6074 - Michigan Schedule of michigan-subtractions
Form MI-4797 - Adjustments of Gains and Losses From Sales of Business Property
Schedule NR - Nonresident and Part-Year Resident Income
Schedule 1 Instructions
Disclaimer: Always verify information with official forms and instructions from the Michigan Department of Treasury or the Federal Internal Revenue Service. OLT (Online Taxes) provides guidance based on retrieved context but does not guarantee accuracy for all individual circumstances.