Individual income tax: credit; credit for the installation of an accessory dwelling unit; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 282.

2025-2026 Regular Session Introduced by Gina Johnsen and 2 co-sponsors

Michigan offers a 20% nonrefundable income tax credit for constructing an ADU on a principal residence, starting 2026, with carryforward if unused.

bill electronically reproduced 06/16/2026

#individualincometax:credit

Summary of HB 6084 (2025-2026) – Michigan

Purpose and intent

HB 6084 proposes a new individual income tax credit for taxpayers who construct an accessory dwelling unit (ADU) on the same property as their principal residence. The credit is designed to encourage additional housing on existing residential lots by providing a specified percentage of construction costs as a credit against Michigan income tax beginning with tax years that start on or after January 1, 2026.

Key provisions and changes

Tax credit amount: For the 2026 and subsequent tax years, a taxpayer may claim a credit equal to 20% of the costs to construct an ADU on the taxpayer’s property.

Eligibility and proof: The Michigan Department of Treasury may require reasonable documentation or proof of the construction costs for which the credit is claimed.

Carryforward provision: If the credit for a tax year plus any unused carryforward exceeds the taxpayer’s tax liability for that year, the excess may not be refunded. Instead, the remaining amount can be carried forward to offset tax liabilities in future years until it is fully utilized.

Definitions:

Accessory dwelling unit (ADU): A secondary, smaller dwelling unit located on the same property as the principal residence. This can be a detached structure, an addition, or a converted space (e.g., a basement or garage) that constitutes an ADU.
Principal residence: As defined in section 7dd of the General Property Tax Act (1893 PA 206, MCL 211.7dd).

Who is affected

Taxpayers with a principal residence in Michigan who construct an ADU on their property. This includes homeowners undertaking new construction, additions, or conversions to create an ADU.

Tax administration: The Department of Treasury would administer the credit, verify eligibility, and review cost documentation as necessary.

Procedural and timeline aspects

Effective date: The credit applies to tax years beginning on or after January 1, 2026.

Legislative action timeline: Introduced and referred to the Committee on Government Operations in June 2026. Pending committee consideration and potential passage by the Legislature, followed by any required regulatory or statutory implementation steps.

Practical considerations

The 20% credit provides a direct incentive to invest in ADUs, potentially increasing housing options on existing residential lots.

The non-refundable nature of the credit means it reduces tax liability only to the extent of the tax owed for the year; any excess is carried forward rather than refunded.

Verification processes will require proper documentation of construction costs, which may involve contractor invoices, building permits, and cost records.

If you’d like, I can tailor this summary for a policy brief, pros/cons analysis, or a comparison with other housing-related tax incentives.