StructuredSales.org
StructuredSales.org
For 2026 Michigan's individual rate is a flat 4.25%, and capital gain is just more income. There is no long-term exclusion and no farm-asset deduction. A Muskegon tooling owner or a Thumb grain family looks at a structured installment sale because one year of gain fills the 20% federal bracket and the 3.8% net investment income tax. Michigan tax on the gain is mostly a question of when the check is written.
Detroit, Grand Rapids, Lansing, Flint, and other cities tax income under their own ordinances. A sale that is a 4.25% problem from an Ottawa County township is a different bill for someone domiciled in Detroit.
MCL 206.51 can cut the individual rate for a year when general-fund growth beats inflation. The cut is not permanent. On April 15, 2026, Treasury announced that the test failed for tax year 2026. General fund / general purpose revenue for the fiscal year ended September 30, 2025 declined 1.56%, while inflation was 2.70%. The rate stays 4.25%. The test will be run again. An installment payment in a later year is taxed at that year's rate. Modeling every future year at 4.25% is the conservative column.
Michigan individual taxable income starts from federal adjusted gross income, with Michigan additions, subtractions, and a personal exemption. Gain on Form 6252 is in that starting point in the year of the federal inclusion. There is no Michigan election that re-bunches installment gain into the year of sale if you stayed on the federal installment method. Electing out federally elects out for Michigan too.
The City Income Tax Act, MCL 141.611, imposes 1% on resident individuals and one-half of 1% on nonresidents, and a city may go lower. Detroit and Grand Rapids are the exceptions on the city withholding certificate the University of Michigan posted February 16, 2026: Detroit 2.4% resident and 1.2% nonresident, Grand Rapids 1.5% and 0.75%, and 1% / 0.5% for the other cities that certificate covers, including Flint, Jackson, Lansing, and Muskegon. Read the form for the year you close.
MCL 141.612 taxes a resident's capital gains. MCL 141.613 taxes a nonresident's capital gains from real and tangible personal property located in the city, and the nonresident's share of an unincorporated business conducted in the city. A Grosse Pointe seller of a Detroit warehouse looks at the nonresident city rate on that building. A Detroit resident selling a Huron County farm looks at the resident rate on the gain the resident return picks up. City taxes are flat. Spreading recognition does not cut the city rate. The city is paid as payments come in, at the rate then in effect.
On a $1 million gain, Detroit's 2.4% resident rate is about $24,000. Grand Rapids at 1.5% is about $15,000. Michigan's 4.25% is about $42,500, before federal tax. The example below leaves city tax out because the sellers live outside a taxing city. Add the city only if the ordinance applies.
West Michigan exits often look like a building, a book of customers, and depreciated machines. Grand Rapids, Holland, and Muskegon shops sell to strategic buyers and to private equity. The machines throw off section 1245 recapture, recognized in the year of sale under section 453(i) no matter how goodwill and real estate are scheduled. Michigan taxes that ordinary income at 4.25%, and a city taxes it if the resident or property tests are met. The installment schedule is only for gain the installment method allows. Equipment-heavy businesses walk through the same split.
North of there the asset is land: Oceana and Leelanau fruit, Thumb sugar beets and corn, cash grain inland from Saginaw Bay, and Upper Peninsula timber. Michigan does not offer Iowa's retired-farmer exclusion. The gain on the ground is Michigan income. Allocation between land and depreciable improvements is in the farmland guide, and basis after a death is in inherited farmland. Families weighing a sale against holding for another step-up should read sell or hold with a Michigan attorney. Confirm whether any state death tax applies before you treat holding until death as free.
Detroit and inner-suburb rentals raise the city question and the tired-landlord question. Unrecaptured section 1250 gain and suspended passive losses do not fit in one percentage. Start with selling an apartment building and installment sales of real estate, then add the city rate only for the city that has jurisdiction.
If the property is across a state line, use that state's guide. Ohio, Illinois, Minnesota, and Wisconsin are the neighbors with pages here. A Michigan resident who sells Minnesota land owes Minnesota on the Minnesota-source gain.
Schedule NR tells nonresidents and part-year residents to start from federal adjusted gross income and to put only the Michigan piece in column B. Capital gains that are partly Michigan run through MI-1040D. Treasury's description of MCL 206.110 through 206.115 reaches gain on real and tangible property located in the state. An installment payment is the later federal recognition of gain from that Michigan asset. File in the year of recognition if the source rules still point here. Florida does not collect Michigan's tax, and it does not repeal it.
Part-year residency in the year of sale splits the year. A lot of intangible gain follows where you lived when you received it, if it is not from a Michigan business. Income allocated by the property's location follows the property. Do not use one rule for both.
Married filing jointly. Other income $160,000. Installment-eligible long-term gain $1,000,000, from real estate and goodwill. They live outside any city income tax. Section 1245 recapture is excluded from both columns because it is year-of-sale income either way. The installment case is eight slices of $125,000, with the same other income each year. Federal math uses 2026 joint long-term brackets from Revenue Procedure 2025-32 (15% from $98,900 of taxable income to $613,700, 20% above), the $32,200 standard deduction, and 3.8% NIIT above $250,000 of modified adjusted gross income. Michigan is 4.25% of the $1,000,000. Interest on the annuity is not in the table. Estimates only.
| Estimate | One-year sale | Eight annual slices |
|---|---|---|
| Federal long-term gain tax | $175,705 | $150,000 |
| Federal 3.8% NIIT | $34,580 | $10,640 |
| Michigan tax at 4.25% | $42,500 | $42,500 |
| Combined | $252,785 | $203,140 |
The illustrated difference is about $50,000, all federal. Taxable ordinary income of $127,800 already uses the 0% federal band. The lump sum puts about $514,000 of gain in the 20% bracket. Each $125,000 slice fits in the 15% bracket. NIIT falls because each year exceeds $250,000 by $35,000 rather than by $910,000. Michigan stays $42,500 if the rate stays 4.25%. A Detroit resident would add about 2.4%, roughly $24,000, to both columns. This sale is under the $5 million section 453A threshold. Related-party rules in sections 453(e) and 453(g) are in the section 453 overview.
The calculator is a sketch using a single state rate. It will not know whether you live in the city of Grand Rapids. Neither will a brochure. Your CPA will, if you tell them the address of the house and the address of the building.
Yes. On April 15, 2026, the state treasurer and the directors of the House and Senate fiscal agencies determined that the conditions for a rate cut were not met. General fund revenue for the fiscal year ended September 30, 2025 fell 1.56% while inflation was 2.70%. The 2026 rate under MCL 206.51 is 4.25%. A later year can differ. A payment uses the rate for the year it is recognized.
Some do. The City Income Tax Act lets a city tax residents at up to 1% and nonresidents at up to half that, with Detroit and Grand Rapids higher. A University of Michigan withholding certificate updated February 16, 2026, states Detroit at 2.4% for residents and 1.2% for nonresidents, Grand Rapids at 1.5% and 0.75%, and 1% and 0.5% for the other cities on that form. Residents are taxed on capital gains generally. A nonresident is taxed on gain from real and tangible property in the city. Township residents outside a taxing city do not add this layer.
The state rate is flat, so Michigan tax on a dollar of gain is the same in a lump-sum year or a payment year, as long as that year's rate is 4.25%. Spreading changes when the tax is paid. The bracket savings are federal. A future one-year cut under MCL 206.51 would lower tax on gain recognized in that year. Do not count a cut that has not been determined.
Michigan taxes nonresidents on income attributable to Michigan. Schedule NR allocates capital gain using Form MI-1040D, and rents from Michigan real property are allocated to Michigan. Treasury guidance under MCL 206.110 through 206.115 treats gain from real and tangible property in Michigan as Michigan income. Installment gain is picked up in the year it is on the federal return, and the Michigan portion stays with the property. Leaving for Florida does not relocate a Grand Rapids building.
All four tax gain as ordinary income, with no farmer exclusion like Iowa's. Michigan's 2026 rate is 4.25%, before any city tax. Ohio, Illinois, and Minnesota each have their own rates, additions, and — in Minnesota — a net investment income surtax that installment timing can affect. Read the state guide for the state where the property or the business is actually located. A buyer across the state line does not move the source of the gain.
Last reviewed: October 22, 2026. The table is an estimate under the assumptions stated above it.
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