MI-1040H: Schedule of Apportionment (2025)
Michigan · Michigan Treasury · Used for tax years 2025
Michigan Form MI-1040H is the 2025 Schedule of Apportionment for individual, fiduciary, and composite filers. It reports Michigan and total sales to calculate an apportionment percentage, then uses that percentage to determine business income or loss attributable to other states.
Who files this form
Use the 2025 MI-1040H to apportion business income from business activity that is taxable both within and outside Michigan. The form is used by individual income tax, fiduciary, and composite filers.
Business income is taxable in another state if you are subject there to one of the taxes listed in the instructions, or that state has jurisdiction to impose a net income tax, even if it does not actually impose one. For this purpose, “state” includes a foreign country.
Generally, use a separate MI-1040H for each business activity requiring apportionment. You may elect combined apportionment for entities that qualify as a unitary business.
What you'll need
Have the following information and applicable forms ready:
- Identification: Individual filers need the owner's name and full nine-digit Social Security number. Fiduciary and composite filers need the estate, trust, or company name and full FEIN.
- Business information: The business entity's name and FEIN, unless using the combined unitary election.
- Sales and income figures: Michigan sales, total sales everywhere, and business income or loss included in adjusted gross income that is subject to apportionment.
- Related forms, if applicable: U.S. Form 461, Michigan Form MI-461, and Form MI-1040D to determine which amounts belong on line 10.
- Combined apportionment support: A schedule showing the computations. Individual taxpayers must also provide a statement identifying group members, showing combining calculations, and describing the unitary relationship between the entities.
How to file
Include MI-1040H with Form MI-1040, MI-1041, or Form 807. Type or print in blue or black ink. The supplied text does not provide a mailing address or e-file directions.
- Enter the required identification and business information.
- In Part 1, enter Michigan sales on line 6 and total sales on line 7. Divide line 6 by line 7 to find the apportionment percentage on line 8.
- If you filed U.S. Form 461 with a current-year federal limitation on business losses, check box 9 and complete MI-461 before Part 2.
- In Part 2, enter eligible business income on line 10. Multiply it by the line 8 percentage for line 11, then subtract line 11 from line 10 for line 12.
- Transfer line 12 to Schedule 1, line 13 for income or line 4 for loss. Nonresidents and part-year residents include it on the appropriate line in Schedule NR, column C.
For combined unitary apportionment, check box 5, write “Unitary” in box 3, and leave box 4 blank. List the entities in Part 3 and attach the required supporting computations and statement. If listing more than eight entities, include additional MI-1040H forms with “Unitary” on line 3 and lines 6 through 12 blank.
Common mistakes
- Overlooking throwback sales: Michigan sales may include sales of tangible personal property originating in Michigan and sent to another state or country where they are not taxable.
- Including nonbusiness receipts: Exclude receipts of nonbusiness income from the sales factor.
- Double-counting income on line 10: Exclude amounts already reported and apportioned on MI-461. Also exclude apportioned business capital gains or losses reported on line 3 and/or line 8 of MI-1040D or MI-461.
- Including guaranteed payments to partners: These are not business income for Michigan purposes and should not appear on line 10.
- Combining multiple forms incorrectly: Michigan residents must total line 12 losses separately from line 12 income. Nonresidents with multiple MI-1040H forms must net line 12 income and losses before entering the total on Schedule NR, column C.
- Applying the unitary election selectively: If you elect combined apportionment, you must use it for every unitary group from which you receive income or loss.
Questions people ask
Does business income include portfolio income?
Yes. Michigan business income includes a distributive share of income or loss from a flow-through entity, including portfolio income. Portfolio income includes interest, dividends, royalties, and net short-term and long-term capital gains or losses reported on federal Schedule D.
How are service sales assigned to Michigan?
Sales other than tangible personal property, such as services, are Michigan sales if the business activity is performed in Michigan. If it is performed both in Michigan and elsewhere, the sales are Michigan sales when a greater proportion of the activity is performed in Michigan, based on cost of performance.
Is the combined apportionment election permanent?
No. The election is made annually. The taxpayer must control the included entities, and there must be a flow of value between their operations. Eligibility depends on the totality of the circumstances.
Can a unitary group include non-Michigan entities?
Yes. A unitary business may include non-Michigan entities. An individual taxpayer may include only entities whose business income or loss is reported in that individual's adjusted gross income.