IRD Deduction – NJ Estate Taxes
Does anyone have any idea if an IRD Deduction can be taken for estate taxes paid to a State? I work in NJ, and a NJ resident’s estate is ssubject to NJ Estate Tax if their estate exceeds $675,000. On a $2MM estate, the NJ Estate tax is roughly $100,000. Is an IRA Beneficiary entitled to take an IRD deduction if the presence of an IRA (or other IRD asset) either created or increased the NJ Estate Tax?
Permalink Submitted by Alan Spross on Fri, 2007-11-02 23:40
No, the IRD deduction only applies to federal estate taxes paid. We may be seeing an erosion of the IRD deduction because the federal unified credit keep going up, while many states are passing their own estate tax laws to replace their lost shares of the federal tax. As a result, many decedents will be paying state estate taxes but no federal tax and there will be no IRD misc. itemized deduction. There is also no deduction for state inheritance taxes.