skip to main content


Michigan Enacts SALT Cap Workaround for Pass-Through Entities

December 23, 2021

For tax years beginning in 2021, Michigan pass-through entities can make an election to pay a 4.25% income tax, which can be taken as a tax credit on the owner’s individual Michigan tax return. Michigan follows the trend of several other states in an attempt to create a workaround to the current federal limitation of $10,000 for individual taxpayer deductions on state and local taxes. This bill is expected to save Michigan pass-through entity owners roughly $200 million annually in federal taxes.

This legislation allows for an election to be made retroactively for the 2021 tax year. Pass-through entities intending to make such election for 2021 must do so by April 15, 2022. This initial election is irrevocable for the two subsequent tax years and a separate election will need to be made for future years if the entity wants the election to continue. For cash basis taxpayers this may be time sensitive. Even though a taxpayer may have until April 15, 2022 to make the election, in order to claim deduction for 2021 payment needs to be made by December 31.

If you would like to discuss the potential impact on you or your pass-through entity, please reach out to one of our tax attorneys for a more detailed discussion.

About the author:

Image of John Gatti, Tax attorney of Kerr Russell John D. Gatti is a Certified Public Accountant as well as an attorney. He concentrates his practice in the areas of taxation, mergers and acquisitions, business law, real estate law, and estate planning. John also serves as the firm’s administrative partner and chairs the firm’s Taxation Practice Group. He has considerable experience representing professional services firms. These include accounting, engineering, and architectural firms, as well as insurance agencies, in purchase and sale transactions.


Headshot of Cody Attisha of Kerr RusellCody Attisha focuses on taxation law, corporate law, mergers and acquisitions, finance, and estate and trust planning. He also helps clients with entity formation, including evaluating, choosing, and implementing the right partnership, corporate, or non-profit structure.



Shaun Graff Shaun T. Graff is a corporate attorney who focuses his practice on tax, mergers and acquisitions, and general corporate matters. He assists clients with all manner of corporate transactions, including the purchase and sale of assets, stock and entire companies.

Other posts to consider: