Does Michigan Have an Estate or Inheritance Tax?

Michigan is one of the majority of states with no working death tax. This article explains what the state’s inheritance tax and estate tax actually cover, why neither produces a bill for a typical estate, and when the federal estate tax or another state’s rules can still reach an inheritance. It is part of the broader guide to estate planning in Michigan.

Michigan’s inheritance tax applies only to pre-1993 deaths

Michigan’s inheritance tax is a dead letter for practically everyone. Under MCL 205.223, the inheritance tax sections apply only to the estate of a decedent dying before October 1, 1993. The Michigan Department of Treasury states the same rule plainly: the tax “is still in effect, but only for those individuals who inherited from a person who died on or before September 30, 1993,” according to the Treasury Inheritance Tax FAQ.

An inheritance tax is a tax on the right to receive property from someone who died. Where it exists, the person who inherits, not the estate, owes it, and the rate usually depends on how closely the heir was related to the decedent. For any Michigan death since October 1, 1993, none of that applies. The one thing that still triggers a Michigan inheritance-tax determination is an after-discovered asset surfacing from the estate of someone who died inside that pre-1993 window.

Michigan’s estate tax collects nothing today

Michigan does keep an estate tax on the books for deaths after September 30, 1993, but it was built to cost estates nothing extra. Under MCL 205.232, the Michigan estate tax equals the “maximum allowable federal credit” for state death taxes. It was a pick-up tax: it captured a share of what a large estate already owed the federal government rather than adding a separate cost.

That federal credit no longer exists. The 2001 federal tax law phased the state death tax credit down and then replaced it with a deduction, so for deaths after December 31, 2004 the credit that Michigan’s tax depends on is zero, leaving nothing for the state formula in MCL 205.232 to pick up. With no federal credit to capture, the Michigan estate tax produces no liability, and the state does not require an estate tax return for these deaths.

The federal estate tax still applies to large estates

The federal estate tax is separate from anything Michigan does, and it still reaches Michigan residents whose estates are large enough. As of 2026, the federal basic exclusion amount is $15 million per person, up from $13.99 million in 2025, according to the IRS estate and gift tax update. An estate below that threshold owes no federal estate tax and generally files no federal estate tax return.

The 2026 figure of $15 million comes from Public Law 119-21, enacted in July 2025, which set the exclusion in the Internal Revenue Code. Estates that cross the threshold report the tax on IRS Form 706, the federal estate tax return, which is generally due nine months after the date of death.

A married couple can effectively combine their exclusions. When the first spouse dies, the estate can elect to transfer the deceased spouse’s unused exclusion to the survivor, a feature the IRS calls portability, by filing Form 706 even when no tax is due. That election lets a surviving spouse shelter more than the single-person amount when the second spouse dies.

When a Michigan inheritance can still be taxed

Even without a Michigan death tax, a few situations still create a tax bill connected to an inheritance.

• Another state’s inheritance tax. A handful of other states still levy an inheritance tax on the people who inherit. That tax is imposed by the state where the decedent lived or owned property, not by the heir’s home state. A Michigan resident who inherits from a relative who lived in one of those states can owe that state’s inheritance tax on the transfer.
• Income tax on inherited retirement accounts. Money in a traditional IRA or 401(k) was never taxed while the owner was alive, so distributions an heir takes from an inherited account are taxable income, both on the federal return and on the Michigan income tax return. The inheritance itself is not income, but the withdrawals are.
• Gains after you inherit. Inherited property generally takes a new cost basis equal to its value on the date of death, so a later sale is taxed only on appreciation after that date. Selling an inherited house or stock can still produce a capital gain.

Settling a Michigan estate without a death tax

Skipping a death tax does not remove the other work of settling an estate. A Michigan estate may still need to pass through probate, and the personal representative remains responsible for the decedent’s final income tax returns and for any income the estate earns before it closes. Those duties exist regardless of the estate’s size and are unrelated to the estate and inheritance taxes above.

A personal representative also gathers and values the estate’s assets, pays valid debts and expenses, and distributes what remains under the will or, when there is no will, under Michigan’s intestate rules. None of these steps depends on an estate or inheritance tax being owed, and none of them is waived because Michigan collects no death tax.