The Michigan R&D tax credit, explained
Michigan's new refundable R&D credit started in 2025, but a $100 million cap led to reduced payouts in its first year.
Last verified July 2026 against Michigan Department of Treasury guidance.
The short answer
Michigan has a new state R&D tax credit, effective for tax years beginning on or after January 1, 2025. It did not exist before that, so this is the first year Michigan companies can claim a state credit alongside the federal one.
How the Michigan credit works
The rate depends on company size. Small employers, meaning fewer than 250 employees, get 3% of qualified Michigan research spending up to a base amount, plus 15% of spending above that base, capped at $250,000 a year. Large employers get 10% of spending above the base, capped at $2 million a year. Companies that collaborate with a Michigan public university or nonprofit college can add another 5%, up to $200,000 more.
The credit is refundable. But the statewide pool is capped at $100 million a year, with $25 million reserved for small employers. When claims exceed the cap, the state prorates every claim down. For the first year, 2025 expenses, small-employer claims were paid at around 60% of face value because the pool was oversubscribed.
How it stacks with the federal credit
Michigan's new credit stacks with the federal R&D credit, since it uses Michigan qualified research expenses as its base, similar to the federal definition.
Example: a Michigan auto-tech startup with 20 employees and an average salary of $98,000 spends $1,960,000 on qualified Michigan research. As a small employer, if the base amount is $1,200,000, the credit is 3% of that base ($36,000) plus 15% of the $760,000 excess ($114,000), for $150,000 total, under the $250,000 cap. Because the 2025 pool was oversubscribed, the actual cash received could be prorated down, potentially to around $90,000 at a 60% proration rate. The same $1,960,000 in spending can generate a federal credit of roughly $118,000 to $196,000, and a company under $5 million in revenue can apply that federal credit against up to $500,000 of payroll taxes a year.
Because Michigan's credit is refundable but capped and prorated, treat the calculated amount as an estimate until the state confirms the final payout rate for that claim year.
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Eligibility and how to claim it
Any company doing qualified research in Michigan can apply, with the rate depending on employee count. Small employers, under 250 workers, get the higher marginal rate above the base amount. Large employers get a lower rate but no employee count restriction.
Companies that partner with a Michigan public university or independent nonprofit college or university on documented research can add a 5% bonus, up to an extra $200,000, on top of their base credit.
The process starts with a tentative claim filed through Michigan Treasury Online, using actual, not estimated, expenses. The state uses these tentative claims to calculate proration if the annual cap is exceeded. The credit is then claimed on the company's annual CIT return. Claimship prepares the underlying research study and expense breakdown. The company's CPA files the tentative claim and the CIT return.
Official source: Michigan Department of Treasury.
Carryforward and deadlines
For research expenses from the 2025 calendar year, the tentative claim deadline was April 1, 2026. For expenses in calendar years after 2025, the deadline moves to March 15 of the following year.
Because this credit is new, formal guidance and carryforward rules are still developing. Companies should confirm current-year deadlines and any carryforward provisions with their CPA before relying on this credit in a multi-year plan.