Selling a business in Michigan: what the state takes (2026)
Michigan’s top individual income tax rate is 4.25%. Here is what an owner selling company stock pays, with 2026 rules from official sources and worked examples at $10 million, $25 million and $50 million.
- 4.25%
- Top Michigan income tax rate (2026)
- $1,062,500
- State tax on a $25M long-term gain
- 28.1%
- Combined federal and state rate on $25M
- 28 of 51
- Rank by total tax on $25M (1 = highest)
How Michigan taxes a business sale
- Income tax
- Top rate 4.25%: Flat rate on all taxable income.
- Long-term capital gains
- Capital gains are taxed as ordinary income at the flat 4.25% rate, with no preferential treatment.
- Entity-level taxes
- C corporations pay the 6% corporate income tax, and pass-throughs can elect Michigan's flow-through entity tax. Neither applies to a shareholder's sale of stock.
- Local taxes
- Detroit taxes residents at 2.4% (nonresidents 1.2%), and its resident base expressly includes capital gains less capital losses. Other Michigan cities with an income tax charge lower resident rates.
Three worked examples
| Long-term gain | $10,000,000 | $25,000,000 | $50,000,000 |
|---|---|---|---|
| Federal capital gains tax (20%) | $2,000,000 | $5,000,000 | $10,000,000 |
| Net investment income tax (3.8%) | $380,000 | $950,000 | $1,900,000 |
| Michigan tax | $425,000 | $1,062,500 | $2,125,000 |
| Total tax | $2,805,000 | $7,012,500 | $14,025,000 |
| Effective combined rate | 28.05% | 28.05% | 28.05% |
| Net proceeds after tax | $7,195,000 | $17,987,500 | $35,975,000 |
| Extra tax versus Texas | $425,000 | $1,062,500 | $2,125,000 |
Seller’s tax calculator
Estimate federal and state tax on a stock sale and what is left before fees and debt.
- Long-term capital gain
- $25,000,000
- Federal capital gains tax (20%)
- $5,000,000
- Net investment income tax (3.8%)
- $950,000
- Michigan tax
- $1,062,500
- Taxable gain at 4.25%
- $1,062,500
- Total tax
- $7,012,500
- Effective rate on the gain
- 28.05%
- Net proceeds after tax
- $17,987,500
Not included: Detroit resident city income tax residents pay up to 2.4% on top, about $600,000 on this gain.
Illustration, not tax advice. Assumes a resident individual, the whole gain long-term, top marginal rates, no state credits, installment terms, QSBS exclusion or other planning, and no local taxes. Net proceeds are before transaction fees, debt repayment, escrows and earn-outs. Rates are for tax year 2026 where published; see the methodology.
Compare with other states
Neighboring states
Common comparisons
- California37.1% combined, $15.72M net
- New York34.1% combined, $16.48M net
- Texas23.8% combined, $19.05M net
- Florida23.8% combined, $19.05M net
- Nevada23.8% combined, $19.05M net
- Washington33.5% combined, $16.63M net
- Tennessee23.8% combined, $19.05M net
Methodology and sources
Michigan figures are for tax year 2026. Treasury determined on Apr 15, 2026 that the 2026 rate stays at 4.25% (no MCL 206.51 trigger reduction). The examples assume a resident individual selling privately held stock for a long-term gain equal to the sale price (zero basis), with every dollar taxed at the top marginal rates, the federal 20% capital gains rate and the 3.8% net investment income tax, and no planning, credits or local taxes. Full assumptions are in the report methodology.
All 50 states and DC with source URLs.
- 1Michigan Treasury: State individual income tax rate for 2026 tax year determined (Apr 15, 2026)
- 2Michigan Treasury, 2025 City of Detroit Individual Income Tax Instruction Book (Form 5313)
- 3Tax Foundation, State Individual Income Tax Rates and Brackets, 2026. Secondary source
Data last updated October 26, 2026.
Cite this research
You may quote and republish figures from this page with attribution and a link to the source.
Citation
Laurent Capital Research, “The Seller’s Tax Map: What Selling a Business Costs in Every State (2026): Michigan,” 2026, https://laurent.capital/research/seller-tax-map/michiganLink (HTML)
<a href="https://laurent.capital/research/seller-tax-map/michigan">The Seller’s Tax Map: What Selling a Business Costs in Every State (2026): Michigan</a> (Laurent Capital)Planning a sale and weighing the tax cost?
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