Estate and Inheritance Taxes in the Wolverine State

TaxMichigan doesn’t have an inheritance tax. It was repealed in 2019. The state’s estate tax technically is still on the books. However, since 2005, there hasn’t been a way to collect it, because Michigan’s estate tax depended on a provision in the Internal Revenue Tax Code.

That section allowed a state estate tax credit against the federal estate tax. When Congress eliminated that credit in 2005, it effectively wiped out Michigan’s estate tax.

Yahoo Finance’s recent article titled “Michigan Inheritance Laws: What You Should Know” reminds us that estate and inheritance taxes are two different things.

Estate taxes are taken out of the deceased person’s estate right after their passing.

An inheritance tax is levied upon the deceased’s heirs after they receive their inheritance.

There are now only six states that have an inheritance tax. Those states are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.

Each state sets its own inheritance tax rules, exemption amount, and rates, so the inheritance tax differs in each state.

Michigan also doesn’t have a gift tax. The federal gift tax is applied once you give any individual more than $15,000 in a calendar year. If you give less than that, there’s no federal gift tax.

Remember that you may have to pay federal estate tax if your inheritance is more than $11.58 million. If it is, you’ll be taxed on the amount over that threshold, not the entire estate. Federal estate taxes are due nine months after the date of death.

Reference: Yahoo Finance (Feb. 20, 2020) “Michigan Inheritance Laws: What You Should Know”

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