June is here, and for business owners across the Great Lakes State, a critical tax date is approaching. If you own an S-corporation or a partnership, your state tax planning depends on careful timing this quarter. The Michigan FTE tax June 2026 deadline is your chance to reduce your federal tax burden, and it ranks among the more valuable dates on your calendar this year. A qualified Michigan tax attorney can help you confirm eligibility and avoid the missteps that cost owners real money. This article explains why the deadline matters, how your business benefits, and what to do right now, even if your company missed earlier payments this year.
Understanding how the flow-through entity tax works can save your business thousands of dollars in federal taxes. With state and federal codes changing as quickly as they have, staying ahead of these dates keeps money in the business instead of on the table.
To understand why the deadline matters, it helps to know the recent history of the State and Local Tax (SALT) deduction. Under the federal Tax Cuts and Jobs Act of 2017, the deduction individuals could claim for state and local taxes was capped at $10,000. That limit hit owners in higher-tax states hard. The picture shifted with the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The OBBBA raised the federal SALT cap to $40,000 for tax years 2025 through 2029, with the cap rising 1% each year. For the 2026 tax year, the cap is $40,400.
The higher cap comes with a catch. For taxpayers with modified adjusted gross income above $500,000, the benefit phases down by 30% of the income above that threshold. The deduction never drops below $10,000, but by the time income reaches roughly $600,000, most filers are back to a $10,000 cap. Many profitable owners either exceed the cap quickly or lose it to this phaseout. That is where the Michigan Flow-Through Entity (FTE) tax becomes useful.
Michigan’s FTE tax is a state-approved workaround that helps owners preserve their federal deduction. Instead of passing all state income tax through to individual owners, eligible S-corporations and partnerships can elect to pay Michigan income tax at the entity level. The business pays a flat 4.25% tax on its elective income directly to the state. The owners then receive a refundable credit on their personal Michigan returns equal to their share of the tax the entity paid.
Here is the key move. Because the entity pays the tax, the 4.25% payment becomes a deductible business expense on the federal return. That deduction sits outside the individual SALT cap and its phaseout, so it shelters income that would otherwise lose the federal benefit.
[Business Entity] –> Pays 4.25% FTE Tax to State –> Fully Deductible Federal Expense
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v
[Individual Owner] <– Receives Refundable Credit <– Sidesteps Individual SALT Cap
The June milestone centers on the second-quarter estimated tax payment, which is due June 15, 2026. For businesses on a calendar year, this is an important checkpoint for staying compliant and protecting the tax advantage.
It helps to separate two dates that often get confused. June 15 is the deadline for your Q2 estimated payment. It is not, by itself, the deadline to elect into the FTE tax. Michigan changed the election timing with House Bill 5022 (Public Act 216 of 2024), effective for tax years beginning on or after January 1, 2024. A calendar-year entity can now elect as late as the last day of the ninth month after the tax year ends, which is September 30 of the following year. The election window for the 2026 tax year actually runs well past June.
So why treat June as urgent? Two reasons. First, if you intend to make the election for 2026, staying current on your quarterly estimates protects you from underpayment penalties and interest. Second, June 15 is a natural second window for owners who missed the first-quarter payment in April. Keeping your estimates on schedule now avoids a larger catch-up payment later.
The Michigan Department of Treasury enforces these timelines. If your estimated payments fall short, you can face an underpayment penalty of 10% on the deficiency, and a 25% penalty applies if no estimated payments are made for the year. Falling behind can also complicate the entity-level deduction you are counting on at the federal level.
The election is not open to every business structure. It is built for flow-through entities, which mainly means S-corporations and partnerships.
If you run a single-member LLC taxed as a sole proprietorship, you generally cannot make this election unless you have elected to be taxed as an S-corporation. Traditional C-corporations cannot use the FTE tax either, because they already pay corporate income tax at the entity level and do not pass income through to owners’ personal returns.
For entities that do qualify, one rule deserves real attention before you commit. The Michigan FTE tax election is irrevocable, and it binds the entity for three tax years: the year of the election plus the next two successive years. You cannot opt out in the middle if your situation changes. The election is made by submitting a payment through Michigan Treasury Online (MTO) directed to the first year of the election period.
Because the higher federal SALT cap is scheduled to expire after 2029, a three-year election made in 2026 would cover years both inside and outside the current favorable window. That is worth modeling before you elect, not after.
Calculating your June estimate is not as simple as copying your federal numbers. Michigan’s tax code follows its own rules, and recent legislation created meaningful gaps between federal and state taxable income.
On October 7, 2025, Governor Whitmer signed House Bill 4961 into law as Public Act 24 of 2025. The law advanced Michigan’s Internal Revenue Code conformity date to January 1, 2025, and decoupled the state from several taxpayer-friendly provisions in the OBBBA. For tax years beginning after December 31, 2024, owners need to account for these differences:
Because of these add-backs, your Michigan taxable income can run well above your federal taxable income. If you base your June FTE estimate only on federal figures, you risk underpaying the state and drawing a penalty from the Department of Treasury.
To show the impact of hitting the Michigan FTE tax June 2026 deadline, consider a hypothetical business based in Grand Rapids, Michigan.
“Precision Manufacturing Solutions” is an S-corporation owned equally by two partners. In 2026, after adjusting for Michigan’s decoupling rules on depreciation, the company projects net state taxable income of $1,000,000.
The company skips the election. The $1,000,000 of pass-through income flows to the two owners’ personal returns. Each partner reports $500,000 and owes Michigan a flat 4.25%, for a state tax bill of $21,250 per partner, or $42,500 total.
On their federal returns, the partners sit right at the $500,000 income threshold where the SALT benefit begins to phase out. Combined with the local property and sales taxes they already pay, their usable SALT deduction is pushed toward the $10,000 floor. The result is that most of the $42,500 they paid in state income tax earns little or no federal benefit.
Instead, the company makes its estimated payments through MTO on the Michigan flow-through entity Q2 2026 schedule and elects in. The entity pays the 4.25% tax, or $42,500, directly to the state.
Federally, that $42,500 is an ordinary business expense. It reduces the company’s federal pass-through income from $1,000,000 to $957,500, so the partners are taxed federally on a smaller amount. On their Michigan returns, they receive a combined $42,500 refundable credit that covers their state income tax in full. The federal deduction is the savings the SALT cap would otherwise deny them.
Note: Prior results do not guarantee a similar outcome. Individual business situations vary based on deductions, structures, and overall net revenue.
Acting before mid-June takes an organized approach. Owners should work through these steps:
Managing corporate tax compliance while running a business can be a lot to carry. The overlap between federal Internal Revenue Service rules and Michigan’s changing tax laws calls for specialized help.
At Levy & Associates, known as Levy Tax Help, our main office sits in Lathrup Village, Michigan, serving Oakland County and the Detroit metro area. Our team includes licensed Michigan attorneys, certified public accountants, and former IRS Revenue Officers. Because many of us worked on the enforcement side of tax administration, we understand how both federal and state authorities look at business accounts.
We help businesses calculate flow-through entity income accurately, adjust for state decoupling rules, and file cleanly through MTO. If your business is facing a dispute or scaling challenges, we provide representation for corporate tax planning and tax audits & appeals before the Michigan Tax Tribunal. Let our local Michigan tax professionals handle the technical work so you can focus on running the business.
Please note: Levy Tax Help does not represent clients in criminal tax matters.
Yes. June 15 is a useful second window if you missed the April quarterly date. Staying current on your estimates helps you avoid compounding underpayment penalties and keeps your flow-through strategy on track for the 2026 tax year.
Yes. Once made, the election is irrevocable and applies to the year of the election plus the next two successive tax years. To continue past that window, the entity has to make a new election. Because the federal SALT cap is set to revert in 2030, a 2026 election is worth modeling across all three years before you commit.
The federal IRS generally has a 10-year Collection Statute Expiration Date under Internal Revenue Code Section 6502. Michigan is shorter. Under Michigan Compiled Laws Section 205.27a, the state generally has 6 years from the date of assessment. Because the federal and Michigan timelines are not the same, do not assume that resolving one resolves the other.
No. The U.S. Tax Court only handles federal tax disputes involving the IRS. A disagreement over Michigan state taxes, including the FTE tax or a state audit, must go through the Michigan Tax Tribunal or the state courts.
For 2026, the federal standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Higher standard deductions lower taxable income for individuals, but they do not change the core math here. Owners with significant pass-through profits can still save by deducting state tax at the entity level rather than trying to itemize it personally.
If you have questions about navigating state pass-through compliance or need help meeting your estimated tax obligations, the team at Levy & Associates is ready to help. Our attorneys, CPAs, and former IRS revenue officers understand how local and federal tax structures work, because many of us worked on the IRS side of these cases. Call us at (877) 500-4930 or contact us online for a free consultation.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.