State guide · Michigan · 2026 rules

S corporation in Michigan: what the election changes

Michigan puts no state tax on an S corporation. The changes are unemployment tax on your salary and, in Detroit and other income-tax cities, a city tax on the corporation.

Updated October 24, 202613 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

Michigan follows the federal S election; there is no state form. Its corporate income tax applies only to C corporations, so an S corporation owes no state entity income tax. You pay Michigan’s 4.25% individual rate for 2026 on the business income either way.

An LLC that elects stays an LLC and keeps paying the $25 annual statement fee. A sole proprietor who forms an LLC to elect starts paying that fee, plus $50 to file the articles of organization.

Unemployment tax on your salary

Unemployment insurance: 2.7% for a new employer, on the first $9,000 of wages in 2026. Michigan law has no exclusion for corporate officers. A sole proprietor owes no unemployment tax on their own earnings, so the election starts this tax on your salary.

Detroit

Today Detroit taxes your net profit on your own city return: 2.4% if you live in Detroit, 1.2% if you live elsewhere and the income is from Detroit.

Detroit taxes an S corporation as a corporation. After the election the business pays the corporate income tax (2.0% for 2025, the latest published rate) on its Detroit net profit after your salary. Your salary is taxed at 2.4% or 1.2% through withholding.

Other Michigan cities

Cities that use the uniform city income tax ordinance, such as Grand Rapids, Lansing, Flint and Saginaw, tax a corporation on its net profit. The base rate is 1% for corporations and residents and 0.5% for nonresidents; some cities have voted higher rates. How each city treats an LLC that elects was not confirmed city by city, so the calculator applies the corporate tax as Detroit does.

The optional flow-through entity tax

An S corporation can elect Michigan’s flow-through entity tax at 4.25% for 2026. You claim a refundable credit for your share of the tax. The election lasts three years. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	No local tax	Detroit resident	Detroit nonresident	1% city
$80,000 / $45,000	$735 lower	$1,081 lower	$661 lower	$838 lower
$120,000 / $60,000	$3,136 lower	$3,689 lower	$2,969 lower	$3,293 lower
$200,000 / $90,000	$7,916 lower	$8,883 lower	$7,563 lower	$8,180 lower

Starting payroll in Michigan

Register for state income tax withholding with the Michigan Department of Treasury through Michigan Treasury Online, and for unemployment insurance with the Unemployment Insurance Agency through MiUI. In Detroit and other income-tax cities you also withhold city income tax.

New hire paperwork for Michigan

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status