How the Michigan deduction works
Michigan's 2025 Public Act 24 added deductions to the Michigan Income Tax Act for tax years beginning after December 31, 2025 and before January 1, 2029. You deduct, on your Michigan return, the qualified tips (IRC §224) and qualified overtime (IRC §225) allowed on your federal return for the same year. Because Michigan uses the federal definitions, the Michigan amount should generally match your federal deduction.
| Tax year | Federal deduction | Michigan deduction |
|---|---|---|
| 2025 | Yes | No |
| 2026 | Yes | Yes |
| 2027 | Yes | Yes |
| 2028 | Yes | Yes |
Residents and nonresidents
- Michigan residents can deduct all the qualified overtime and tips deducted on the federal return.
- Nonresidents can deduct only overtime and tips attributable to services performed in Michigan.
Work out your amount
Start with the federal deduction: the no tax on overtime calculator and the no tax on tips calculator show it. For 2026, the overtime has to appear on your W-2 in box 12, code TT; see what to do if it's missing. Michigan Treasury says it may issue more guidance and instructions as the 2026 tax year forms come out.
Waiting on a Michigan refund? See where's my Michigan refund. Other states: no tax on overtime by state.
Common questions
Does Michigan tax overtime and tips? For tax years 2026, 2027 and 2028, Michigan lets you deduct the qualified overtime and qualified tips you deducted on your federal return. For 2025 the Michigan deduction isn't available, even though the federal one is.
How much can I deduct in Michigan? It generally mirrors your federal deduction for the same year, so the federal limits carry over: up to $12,500 of overtime premium ($25,000 joint) and up to $25,000 of tips, reduced at higher incomes.
I live in another state but work in Michigan. Can I deduct? Nonresidents can deduct only the qualified overtime and tips attributable to work performed in Michigan.
When does the Michigan deduction end? Under current law, 2028 is the last tax year for both the federal and the Michigan deductions.
Updated November 5, 2026. Source: Michigan Department of Treasury, "New Deductions for Qualified Overtime Compensation and Qualified Tips" (January 6, 2026), on 2025 PA 24 (MCL 206.30).