What a contribution saves in Michigan
The table shows three owners, each making the largest first-year contribution their age and income allow. Michigan's top rate is 4.25%, and how much a contribution saves depends on which brackets it comes out of.
| Owner | Contribution | Federal | Michigan | Total |
|---|---|---|---|---|
| Sole proprietor, 45, $250,000 profit, single | $156,000 | $32,700 | $6,600 | $39,300 |
| S corporation, 52, $250,000 salary and $250,000 profit, married | $223,000 | $50,800 | $9,500 | $60,300 |
| Sole proprietor, 58, $600,000 profit, married | $282,000 | $93,000 | $12,000 | $105,000 |
Savings are lower than the contribution times your top rate because a large contribution reaches down into lower brackets, and because for many owners it also reduces the 20% qualified business income deduction. Your own figures depend on your income, filing status and other deductions. The estimate works them out for you.
How Michigan treats the deduction
Michigan starts from federal income, so contributions that reduce your federal adjusted gross income generally reduce Michigan taxable income too. We have not confirmed every state's treatment line by line, so check with your tax adviser if the state saving matters to your decision.
A C corporation is taxed separately, and state corporate tax savings are not shown here.
City income tax
Some Michigan cities levy an income tax, such as Detroit at 2.4%. The examples above leave them out.
If you retire somewhere else
Money in a cash balance plan is taxed when it comes out, not when it goes in. Federal law stops a state from taxing retirement income paid from a qualified plan to someone who no longer lives there (4 U.S.C. 114). So the state you live in when you take the money out is the one that can tax it.
Where you expect to live in retirement is worth factoring in when you compare a contribution now with tax later.
Deadlines are federal
The dates that matter are the same in every state: the plan can be adopted for 2026 up to your business's extended filing deadline, and corporations have to run the salary the plan counts through payroll by December 31. See cash balance plan deadlines or find your dates.