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What You Need to Know About the Michigan Estate Tax

There is no estate tax in Michigan. No matter the size of your estate, you won’t owe money to the Wolverine State. You might owe taxes to the federal government through the federal estate tax, depending on the size of your estate. Whether you are planning an estate or dealing with some other financial planning situation, professional help may be a good idea. SmartAsset can help you find a financial advisor in your area who meets your individual needs.

Michigan Estate Tax

Michigan is one of 38 states that have no estate tax.

What Is the Estate Tax?

The estate tax is applied to the estate of a recently deceased person after they die but before the money is passed on to their heirs. It is sometimes referred to as the “death tax.”

The estate tax is not to be confused with the inheritance tax. That tax is applied to a person’s heirs after they have already received their inheritance.

Michigan Inheritance Tax and Gift Tax

What You Need to Know About the Michigan Estate Tax

Like the majority of states, Michigan does not have an inheritance tax. If you stand to inherit money in Michigan, you should still make sure to check the laws in the state where the person you are inheriting from lives. In Pennsylvania, for example, the inheritance tax can apply to heirs who live out of state if the descendant lives in the state.

Michigan also has no gift tax. The federal gift tax exemption is $15,000 per recipient per year in 2021 and $16,000 in 2022

Federal Estate Tax

Even though there is no Michigan estate tax, you might still owe the federal estate tax. The exemption for that tax is $11.70 million in 2021 and $12.06 million in 2022. This tax is portable for married couples, meaning that with the right legal moves a married couple can protect up to $24.12 million when both spouses have died.

If an estate exceeds that amount, the top federal tax rate is 40%. A full chart of federal estate tax rates is below.

Here’s an example of how it works: Say your estate is worth $21.88 million and you aren’t married. Subtracting the exemption of $12.06 million, leaves you with a taxable estate of $9.82 million. Consulting the chart, you are in the highest bracket. Your base tax payment on the first $1 million is $345,800. You also owe 40% on the remaining $8.82 million, which comes to $3.528 million. That sum ($3.528 million), plus the base taxes of $345,800, means your total federal estate tax burden is $3.8738 million.

Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$1 – $10,000 $0 18% $1
$10,000 – $20,000 $1,800 20% $10,000
$20,000 – $40,000 $3,800 22% $20,000
$40,000 – $60,000 $8,200 24% $40,000
$60,000 – $80,000 $13,000 26% $60,000
$80,000 – $100,000 $18,200 28% $80,000
$100,000 – $150,000 $23,800 30% $100,000
$150,000 – $250,000 $38,800 32% $150,000
$250,000 – $500,000 $70,800 34% $250,000
$500,000 – $750,000 $155,800 37% $500,000
$750,000 – $1 million $248,300 39% $750,000
Over $1 million $345,800 40% $1 million

*The taxable estate is the total above the federal exemption of $12.06 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.

Overall Michigan Tax Picture

What You Need to Know About the Michigan Estate Tax

Michigan is fairly tax-friendly for retirees. Retirement plans and pension are partially taxed and Social Security is not taxed. Michigan’s income tax rate is a flat 4.25% and local income taxes range from 0% to 2.4%. If you have a new job, you can figure out what your take home pay will be, using our Michigan paycheck calculator.

The average effective property tax rate in Michigan is 1.45%. The sales tax rate across the state is 6%.

Estate Planning Tips

  • Estate planning, in Michigan or elsewhere, takes time and knowledge. If you need some help, you should consider finding a financial advisor to guide you through the process. Whether you are planning an estate or doing another type of financial planning, you want to make sure you have the best advisor for your specific situation. SmartAsset can help with that. SmartAdvisor is a free financial advisor matching service. After you answer a few questions about your finances, you’ll get matched with up to three financial advisors in your area. The advisors will get in touch with you to talk about how they can help you and see if you want to work with them. All of the advisors on the SmartAdvisor platform are free of disclosures and are registered financial advisors.
  • Estate planning is easier if you know what your portfolio and savings are going to look like in your later years. You can use our retirement calculator to see how much you are likely to have in retirement.
  • A common misconception about estate planning is that it’s only for older people or rich people. This couldn’t be further from the truth. A solid estate plan can help protect you financially if the unexpected were to occur.

Photo credit: ©, SmartAsset, ©

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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