The R&D tax credit can help a wide variety of businesses offset and reduce their income tax liability, in addition to providing many other benefits.
250+ employees
Fewer than 250 employees
University collaboration (additional credit — all authorized businesses)
To be considered qualified research activities, the research must aim to create or enhance products, processes, or software in a way that involves a significant amount of uncertainty. Additionally, the activities must include experimentation and must be conducted to uncover technological information.
To be eligible for a credit under this section, an employer must submit, in a form and manner as prescribed by the department, a tentative claim for which a credit under this section is sought to the department on or before April 1, 2026 for tentative claims made for qualifying research and development expenses incurred during the 2025 calendar year and for tentative claims made for qualifying research and development expenses incurred for each calendar year after 2025 on or before March 15 after the calendar year ending with or within the tax year for which the employer intends to submit a claim for the credit.
Michigan offers a unique opportunity for businesses to benefit from its state-specific R&D tax credit program. Unlike the federal R&D tax credit, Michigan’s program requires that research and development activities occur within the state. This ensures that businesses contributing to the state’s economy receive the benefits of the program.
Beginning with tax years after January 1, 2025, Michigan introduced a new R&D tax credit with expanded benefits based on business size. Taxpayers with fewer than 250 employees are eligible for a credit of 3% on qualifying expenses up to the base amount and 15% on qualifying expenses in excess of the base amount, capped at $250,000 per tax year. Taxpayers with 250 or more employees are eligible for a credit of 3% on qualifying expenses up to the base amount and 10% on qualifying expenses in excess of the base amount, capped at $2,000,000 per tax year. Additionally, all authorized businesses may claim an extra 5% credit on up to $200,000 in qualifying R&D expenses incurred through collaboration with a Michigan research university. The aggregate amount of R&D credits statewide cannot exceed $100 million per year; if exceeded, the Department of Treasury will prorate the credits among all claimants.
The Michigan research and development tax credit allows for businesses to claim a percentage of their qualifying research expenses.
Wages paid to employees who are directly involved in the performance of research and development activities within the state of Michigan. This includes payments made to subcontractors involved in the performance of such activities.
Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.
