There is no inheritance tax in Michigan. The state repealed it in 1993 and has not collected an estate tax on new deaths since 2005, so heirs generally owe nothing to Michigan when they receive property from someone who died. The only death tax a Michigan family might face is the federal estate tax, and that applies only to estates worth more than $15 million in 2026.
Michigan Repealed Its Inheritance Tax in 1993
Michigan eliminated its inheritance tax through Public Act 54 of 1993. Before repeal, the state taxed property passing from a deceased person to beneficiaries at rates that varied by relationship: close family members paid lower rates, distant relatives and unrelated beneficiaries paid more.1Michigan Legislature. House Legislative Analysis Section – House Bill 4998 The repeal wiped that tax out for anyone who died after September 30, 1993.
One narrow exception. If you are handling an estate for someone who died on or before that date and the old inheritance tax was never resolved, the Michigan Department of Treasury still treats those obligations as active. For every other Michigan estate, the inheritance tax simply does not exist.
Michigan’s Estate Tax Is Zero
People often confuse inheritance tax with estate tax. The difference is who pays: inheritance tax is charged to the beneficiary who receives property, and estate tax is charged to the estate itself before assets are distributed. Michigan has neither in any practical sense.
When Michigan repealed its inheritance tax, it created a state estate tax under the Michigan Estate Tax Act. That tax was a “pickup tax,” set equal to the federal credit the IRS allowed for state death taxes. The total tax bill on the estate did not change; the state just captured a share that would otherwise have gone to the federal government.1Michigan Legislature. House Legislative Analysis Section – House Bill 4998
Congress began phasing out that federal credit in 2001 and eliminated it entirely by 2005. Because Michigan’s tax was pegged to a credit that no longer exists, Michigan’s estate tax dropped to zero. The state never rewrote the law to impose an independent estate tax, so no state-level estate tax has been collected on new deaths since 2005.2Michigan Legislature. Summary As Introduced – House Bill 4237
The Federal Estate Tax Is the Only Death Tax That May Apply
Michigan residents only have to worry about the federal estate tax, and it reaches very few families. For 2026, the basic exclusion amount is $15,000,000 per person. Only the portion of a taxable estate above that threshold is taxed, at a top rate of 40%.3Internal Revenue Service. What’s New – Estate and Gift Tax
The $15 million figure is now permanent. The Tax Cuts and Jobs Act of 2017 had temporarily doubled the exemption, and the increase was scheduled to sunset on January 1, 2026, dropping the exemption back to roughly $7 million. The One, Big, Beautiful Bill Act, signed on July 4, 2025, kept the higher exemption in place and set the base at $15 million, with inflation adjustments starting in 2027.4Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
The federal gross estate includes essentially everything the deceased person owned or had an interest in at death: real estate, bank and investment accounts, retirement accounts, life insurance proceeds, and business interests. Debts, administrative expenses, and qualifying transfers to a spouse or charity are subtracted to reach the taxable estate.5Internal Revenue Service. Estate Tax Property passing outright to a surviving spouse who is a U.S. citizen qualifies for an unlimited marital deduction and is excluded from the taxable estate no matter its value.6Internal Revenue Service. Frequently Asked Questions on Estate Taxes
Married couples can effectively shield up to $30 million from federal estate tax by using portability: any unused portion of the first spouse’s $15 million exemption can transfer to the surviving spouse. Portability is not automatic. The executor has to file a federal estate tax return, Form 706, to elect it, even when no tax is owed. The standard deadline is nine months after the date of death, with an automatic six-month extension available by filing Form 4768 before the original due date.7Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns8eCFR. 26 CFR 20.6081-1 – Extension of Time for Filing the Return If the estate was not otherwise required to file, Revenue Procedure 2022-32 allows a late portability election by filing a complete return within five years of the date of death, with a notation on top of the return.9Internal Revenue Service. Revenue Procedure 2022-32
For estates that do owe federal estate tax, missing the filing deadline is expensive. The failure-to-file penalty is 5% of the unpaid tax per month or partial month, capped at 25%, and a separate failure-to-pay penalty of 0.5% per month runs on top of it.10Internal Revenue Service. Failure to File Penalty
The Tax Rule That Actually Helps Most Heirs: Stepped-Up Basis
For the vast majority of Michigan heirs, the tax question that matters is not estate or inheritance tax. It is capital gains, and the answer is favorable. When you inherit property, your cost basis for capital gains purposes resets to the property’s fair market value on the date the previous owner died, not what they originally paid.11Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
Consider a home your parent bought for $80,000 in 1985 that was worth $350,000 on the date of death. If your parent had sold it during their lifetime, they would have owed capital gains tax on up to $270,000 of appreciation. Because you inherited it, your basis is $350,000. Sell it soon after for that price and you owe no capital gains tax at all. The same rule applies to stocks, real estate, and other appreciated assets.
This is why it is often a mistake to add adult children to a deed during your lifetime. A gift carries the giver’s original basis; only an inheritance gets the step-up.
Watch Out for Property in Other States
Michigan’s zero-tax rules protect you from Michigan taxes. They do not protect you from another state’s rules. If a Michigan resident owns real estate or tangible personal property in a state that imposes its own estate or inheritance tax, that state can tax the property located within its borders. Several states still impose estate taxes with exemption thresholds well below the federal $15 million, and a few impose inheritance taxes on beneficiaries regardless of where the deceased person lived.
Michigan’s own estate tax act adjusts for property located outside the state, but the practical risk runs the other way: a Michigan resident who owns a vacation home in a state with a lower exemption could trigger a state-level estate tax bill that would not exist if all their property were in Michigan.12Michigan Legislature. Michigan Estate Tax Act (Excerpt) – Exceptions and Limitations Out-of-state real estate can also force the estate through ancillary probate in that state, adding cost and time.
Probate Still Costs Time and Money
No tax does not mean no process. Michigan estates typically go through probate under the Estates and Protected Individuals Code, and that is where most families actually spend time and money. Estates worth $53,000 or less for 2026 deaths, after funeral and burial expenses, can use a simplified small estate procedure; the threshold adjusts for inflation each year.13State of Michigan. Estates and Protected Individuals Code Cost-of-Living Adjustments to Specific Dollar Amounts Larger estates go through unsupervised or supervised administration, and full probate can run from several months to more than a year depending on complexity and any disputes.
Creditors generally have four months from published notice to file claims against the estate; creditors the personal representative actually knows about must receive direct notice and have the later of one month after that notice or four months after publication.14Michigan Legislature. Michigan Code 700 – Section 3803 – Limitations on Time for Presentation of Claims Beneficiaries should expect distributions to wait until that window closes.
Assets that pass by beneficiary designation, transfer-on-death registration, revocable living trust, or Michigan’s enhanced life estate (Lady Bird) deed skip probate entirely and go directly to the named recipient.15Michigan Legislature. Michigan Code 700 – Section 6101 – Nonprobate Transfers on Death Life insurance proceeds and retirement accounts follow their beneficiary forms regardless of what the will says, which is why keeping those forms current matters after any divorce, remarriage, or death in the family.