Michigan Agriculture R&D Tax Credit
R&D Tax Credit
Michigan farms, growers and agribusinesses often conduct technical work that goes beyond routine farming. Crop trials, irrigation testing, equipment modifications, greenhouse improvements and precision agriculture projects may involve qualified research when the applicable federal and Michigan requirements are met.
Michigan now also has its own Research and Development Tax Credit, available beginning with qualifying research expenses incurred in calendar year 2025.
RCG Tax Partners helps agricultural businesses evaluate potential
R&D Tax Credit and
Cost Segregation opportunities based on their actual activities, expenses and property.
Potentially. Agricultural businesses may qualify when they conduct technical research intended to resolve uncertainty through a qualifying process of experimentation.
Examples that may warrant review include:
| Michigan Farming Activity | Potential R&D Area |
|---|---|
| Crop and seed trials | Testing varieties, growing methods or performance |
| Soil and nutrient testing | Evaluating fertilizer or nutrient approaches |
| Irrigation systems | Testing configurations, controls or delivery methods |
| Livestock nutrition | Developing or testing feed formulations |
| Equipment modification | Improving functionality, efficiency or reliability |
| Precision agriculture | Testing growing environments and controls |
| Greenhouse production | Testing environmental controls or growing methods |
| Precision agriculture | Developing or improving production processes |
These activities do not automatically qualify. Federal research must satisfy the requirements of IRC §41, and Michigan-qualified expenses must meet the state's requirements.
How Does the Michigan R&D Tax Credit Work?
Michigan's R&D credit applies to eligible businesses whose Michigan Qualified R&D Expenses, or MQREs, exceed their base amount.
Michigan uses the federal definition of qualified research expenses under IRC §41(b), but the research associated with those expenses must be conducted in Michigan. A business does not have to claim the federal R&D credit to be eligible for Michigan's credit..
How Does the Michigan R&D Tax Credit Work?
| Employer Size | Expenses Up to Base Amount | Expenses Above Base | Standard Credit Cap |
|---|---|---|---|
| Fewer than 250 employees | 3% | 15% | $250,000 |
| 250 or more employees | 3% | 10% | $2 million |
Michigan also provides an additional credit equal to 5% of qualifying Michigan R&D expenses incurred through a written collaboration with a Michigan research university, capped at $200,000 annually per claimant.
The statewide R&D program is subject to an annual credit limit and potential proration, so an unadjusted calculated credit may not equal the final amount allowed.
Federal vs. Michigan R&D Tax Credit
| Requirement | Federal R&D Credit | Michigan R&D Credit |
|---|---|---|
| Research framework | IRC §41 | Uses IRC §41(b) definition of QREs |
| Location | Qualified U.S. research rules apply | Research expenses must relate to research conducted in Michigan |
| Agriculture eligible? | Potentially | Potentially |
| Separate calculation | Yes | Yes |
| Federal claim required first? | N/A | No |
This distinction matters for Michigan farms because qualifying agricultural research may need to be evaluated separately for federal and state purposes.
When Is the Michigan R&D Credit Application Due?
Michigan requires eligible businesses to submit an R&D Credit Application before claiming the credit.
For expenses incurred during 2026, the application must be submitted between January 1 and March 15, 2027.
For calendar years after 2025, March 15 of the following year is generally the application deadline. Late applications are not accepted.
Businesses must use actual qualified expenses rather than estimated expenses when submitting the application.
Michigan Farming and Agricultural R&D Opportunities
Michigan has a large and diverse agricultural economy.
According to the USDA's 2022 Census of Agriculture, Michigan had 45,581 farms with approximately $12.2 billion in agricultural products sold.
The largest agricultural sales categories included:
Grains, oilseeds, dry beans and dry peas
Milk
Nursery, greenhouse and floriculture products
Cattle and calves
Hogs and pigs
Poultry and eggs
Vegetables and potatoes
Fruits, tree nuts and berries
That diversity creates potential research activity across field crops, dairy, livestock, greenhouses, specialty crops, orchards, processing and agricultural technology.
Michigan's additional credit for qualifying collaboration with a Michigan research university may also be relevant where an agricultural business conducts eligible research under a written university agreement.
Cost Segregation for Michigan Farms and Agricultural Facilities
R&D credits address research activities. Cost Segregation addresses depreciation of buildings and other property.
Michigan farms and agribusinesses may consider a Cost Segregation review after purchasing, constructing or improving agricultural property.
| Agricultural Property | Potential Review Area |
|---|---|
| Grain storage | Grain bins and related systems |
| Greenhouses | Specialized structures and systems |
| Processing facilities | Production-related building components |
| Farm sites | Drainage and qualifying site improvements |
| Production buildings | Specialized electrical, plumbing or process systems |
Federal depreciation periods vary significantly by asset.
For example, IRS Publication 225 lists grain bins and agricultural fences as 7-year property, qualifying single-purpose agricultural or horticultural structures as 10-year property, drainage facilities as 15-year property and general farm buildings as 20-year property under GDS.
How Does Bonus Depreciation Affect Michigan Farm Property?
Federal law restored 100% additional first-year depreciation for certain qualified property acquired and placed in service after January 19, 2025.
Eligible property generally includes qualifying tangible MACRS property with a recovery period of 20 years or less, subject to applicable requirements.
Accurate asset classification can therefore be especially important when a farm invests in equipment, specialized structures or other shorter-life property.
Can a Michigan Farm Use Both R&D Credits and Cost Segregation?
Potentially.
A Michigan farm might conduct crop trials or develop an improved irrigation system while also constructing a processing facility or expanding a greenhouse operation.
The research activity may warrant an R&D Tax Credit review, while the property investment may separately warrant a Cost Segregation study.
Each strategy has its own qualification and documentation requirements.
Frequently Asked Questions About Michigan Agricultural R&D
Does Michigan have an R&D Tax Credit?
Yes. Michigan's R&D Tax Credit became available for qualifying research expenses incurred beginning in calendar year 2025. Eligible businesses must submit a timely application and satisfy the state's qualification and calculation requirements.
Does agricultural research have to take place in Michigan?
For the Michigan credit, yes. Michigan Qualified R&D Expenses must meet the applicable federal expense definition and relate to research conducted within Michigan.
Can a Michigan farm claim both the federal and state R&D credits?
Potentially. The federal and Michigan credits are separate. Michigan specifically states that a business does not have to qualify for or claim the federal credit to be eligible for Michigan's R&D credit.
Can crop trials qualify for the Michigan R&D Tax Credit?
Potentially. Structured crop trials may warrant review when they involve qualified research and the associated expenses meet Michigan's requirements. Routine planting or ordinary production activities do not automatically qualify.
Can Michigan farms use Cost Segregation?
Potentially. Farms that own qualifying buildings and improvements may benefit from reviewing their property classifications and depreciation periods.
Explore More Agriculture Tax Resources
Michigan agricultural businesses can also review RCG's broader Agriculture R&D Tax Credit and Cost Segregation resource for federal qualification rules, farm-property depreciation and related agricultural research examples.
Businesses can also learn more through RCG's dedicated
R&D Tax Credit and
Cost Segregation service resources..
Discuss Michigan Agricultural R&D With RCG
RCG Tax Partners helps businesses evaluate potential R&D Tax Credit and Cost Segregation opportunities based on their activities, expenses and property.
Contact RCG Tax Partners to discuss potential R&D Tax Credit or Cost Segregation opportunities for your Michigan farming or agricultural business.
