Do I Have to Pay Taxes on a $100,000 Inheritance?

If you've just received (or are about to receive) a $100,000 inheritance, it's natural to wonder how big a bite the IRS is going to take. The good news from Real Time Home Buyers Metro Detroit: for most families, especially here in Michigan, the answer is little to nothing.

The Short Answer

A $100,000 inheritance is well below every threshold that would trigger federal estate tax, and Michigan doesn't have a state inheritance or estate tax at all. So simply receiving $100,000 — whether it's cash, a house, or investments — generally isn't a taxable event on its own.

How the Answer Changes Depending on What You Inherited

$100,000 in cash. This is the simplest case. Cash you inherit isn't taxable income. Once it's in your account, though, any interest it earns going forward is taxable, the same as interest on any other savings.

$100,000 worth of stock or investments. Your cost basis "steps up" to the value on the date of the original owner's death. If you sell right away near that $100,000 value, there's little or no taxable gain. If you hold onto it and it grows before you sell, you'd only owe capital gains tax on the growth that happened after you inherited it.

A house worth $100,000. Same step-up rule applies. If you sell close to that appraised value, there's minimal capital gains tax. If the home appreciates before you sell, the gain above $100,000 is what's taxable.

A $100,000 retirement account (IRA or 401(k)). This is the one exception to keep in mind. Traditional retirement accounts don't get a step-up in basis, and withdrawals are taxed as ordinary income. If you're a non-spouse beneficiary, you'll generally need to withdraw the full amount within 10 years, and each withdrawal adds to your taxable income for that year.

Why Michigan Families Have It Easier

Only a handful of states impose their own inheritance tax, and Michigan isn't one of them. So while a $100,000 inheritance might be partially taxed in a state like Kentucky or New Jersey depending on your relationship to the deceased, that's simply not a concern for inheritances passing through Michigan.

The Bottom Line

For most people receiving a $100,000 inheritance in cash, a home, or investments, taxes generally aren't a major concern — especially if you sell or use the assets relatively soon after inheriting them. Retirement accounts are the main exception worth planning around.

If part of your $100,000 inheritance includes a house you're considering selling, Real Time Home Buyers Metro Detroit can make that part simple. We buy homes as-is throughout the area, often closing quickly and without the hassle of repairs or showings. Call us at 248-509-5398 to talk through your options.

This article is for general informational purposes only and isn't tax or legal advice. Please consult a CPA or tax professional about your specific situation.