How Much Are Taxes on 10 Million Dollars?

Receiving $10 million carries significant tax implications. The total tax owed is not a single percentage but is determined by several factors, including how the money was acquired, where you live, and the type of tax system that applies. The final calculation can differ dramatically based on these circumstances.

Determining the Source of the Funds

The first step in understanding the tax consequences of receiving $10 million is to identify its source, as this dictates which tax rules apply.

Ordinary Income

Funds classified as ordinary income are subject to standard federal income tax rates. This category includes money from lottery winnings, a large work bonus, or payment for services. This income is added to any other earnings for the year and taxed progressively through the federal income tax brackets.

Capital Gains

If the $10 million comes from selling a capital asset like stocks, bonds, or real estate, it is a capital gain. The tax treatment depends on how long the asset was owned. An asset held for one year or less results in a short-term capital gain, taxed at the same rates as ordinary income. An asset held for more than one year generates a long-term capital gain, which is subject to lower tax rates.

Gifts and Inheritances

Money received as a gift or an inheritance is not considered income to the recipient and is not reported on their income tax return. These transfers fall under the federal gift and estate tax system, which is handled separately.

Calculating Federal Taxes on Income and Gains

The calculation method varies significantly depending on whether the funds are classified as ordinary income or as a capital gain.

Tax on Ordinary Income

If the $10 million is ordinary income, it is subject to a progressive system with seven federal tax brackets for 2025: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A single individual’s income is taxed in portions as it passes through these brackets. With $10 million in ordinary income, a single filer would pay the top rate of 37% on most of the funds, as this rate applies to income over $626,350. After filling all lower brackets, the federal tax liability would approach $3.7 million.

Tax on Capital Gains

Long-term capital gains from assets held over a year are taxed more favorably at 0%, 15%, or 20%. For a single filer in 2025 with $10 million in long-term capital gains, most of the gain would be taxed at the 20% rate, which applies to income over $533,400. This results in a federal tax of approximately $2 million. In contrast, short-term capital gains are taxed at the higher ordinary income rates, leading to a much larger tax liability.

Net Investment Income Tax (NIIT)

A high-value transaction may also trigger the Net Investment Income Tax (NIIT). This is an additional 3.8% tax on the lesser of a taxpayer’s net investment income or the amount their modified adjusted gross income (MAGI) exceeds certain thresholds. For a single filer, the threshold is $200,000. Net investment income includes capital gains. For a $10 million long-term capital gain, the 3.8% NIIT would apply to the full amount, adding $380,000 to the federal tax bill on top of the 20% capital gains rate.

Navigating Gift and Estate Taxes

The federal gift and estate tax system is designed to tax the transfer of wealth, and the tax obligation rests with the giver or the estate, not the recipient.

For Inheritances (Estate Tax)

If you inherit $10 million, you do not pay federal taxes on it. The federal estate tax is levied on the decedent’s estate before assets are distributed. For 2025, the federal estate tax exemption is $13.99 million per individual, meaning an estate can pass on up to this amount tax-free. An estate valued at $10 million falls below this threshold, so no federal estate tax is due. The responsibility for filing an estate tax return (Form 706), if needed, lies with the estate’s executor.

For Gifts (Gift Tax)

If you receive a $10 million gift, you are not responsible for paying federal gift tax, as the liability falls on the donor. For 2025, a donor has an annual gift tax exclusion of $19,000 per recipient. A gift of $10 million would exceed this, and the excess amount counts against the donor’s lifetime gift and estate tax exemption of $13.99 million. As long as the donor has not used their lifetime exemption, they can give $10 million without paying out-of-pocket gift tax. The donor must file a gift tax return (Form 709).

Recipient’s Tax Basis

A tax consequence for inheriting assets is the “step-up in basis.” When you inherit an asset like stock or real estate, its cost basis is adjusted to its fair market value at the time of the original owner’s death. For example, if you inherit stock purchased for $1 million that is worth $10 million on the date of death, your basis becomes $10 million. If you sell it immediately for that price, you have no capital gain and owe no capital gains tax, which erases the taxable gain accumulated during the decedent’s lifetime.

Factoring in State Tax Liabilities

Federal taxes are only part of the total tax picture, as state-level taxes add another layer of cost. The tax laws of the state where you reside can have a substantial impact on the net amount you retain from a $10 million windfall.

State Income Tax

Most states impose an income tax on residents, which applies to ordinary income and capital gains. Some states have a progressive system with multiple brackets, while others use a single flat rate. A handful of states have no income tax. The difference in liability can be substantial, as a state with a high marginal rate could impose an additional tax of over $1 million on a $10 million gain, while living in a no-tax state would save that amount.

State Estate and Inheritance Taxes

Some states have their own systems for taxing wealth transfers at death: estate taxes and inheritance taxes. A state estate tax is paid by the decedent’s estate, but exemption amounts are much lower than the federal threshold. An estate of $10 million could exceed a state’s exemption, triggering tax even when no federal tax is due. A few states levy an inheritance tax, which is paid by the beneficiaries who receive the assets. The tax rate often depends on the heir’s relationship to the decedent, with closer relatives paying lower rates.

Meeting Payment and Filing Requirements

Receiving a large sum like $10 million creates immediate tax compliance obligations. The U.S. tax system is pay-as-you-go, so you cannot wait until the annual filing deadline to pay the entire liability. Failure to meet these requirements can result in significant underpayment penalties.

Estimated Tax Payments

When you receive income not subject to automatic withholding, like a large capital gain, you must make estimated tax payments to the IRS and your state. For the 2025 tax year, these payments are made in four quarterly installments with deadlines on April 15, June 16, September 15, and January 15 of the following year. You use Form 1040-ES, Estimated Tax for Individuals, to calculate the required amount. Payments can be submitted online through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or by mail with a payment voucher to avoid penalties.

Annual Tax Filing

Making quarterly estimated payments does not eliminate the need to file an annual tax return by the April 15 deadline of the following year. You must file a final return, using Form 1040, to reconcile your total tax liability against the estimated payments you made. On this return, you report the $10 million windfall and calculate the final tax amount. If your payments were more than the total tax owed, you will receive a refund; if they were insufficient, you must pay the remaining balance.