Decedent (IRD) Deduction

AAA

DEFINITION of 'Decedent (IRD) Deduction'

The decedent or IRD deduction stands for Income in Respect of a Decedent deduction. It is an IRS term that refers to inherited income that is subject to federal income tax. It refers to income which was earned by the decedent during his or her lifetime, but the tax was not yet paid on the funds at the time of death. This income is subject to be being taxed as income for the beneficiary.

INVESTOPEDIA EXPLAINS 'Decedent (IRD) Deduction'

The IRD deduction comes into play when someone dies who has a pension plan or IRA and the estate is subject to the federal estate tax. The beneficiary of the estate must pay the income tax as he withdraws funds from the inherited account. The IRD is a deduction which will help offset the amount that has to be paid on the beneficiary's income tax.

RELATED TERMS
  1. Decedent

    A person who is no longer living. Just as a taxpayer's possessions ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  4. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Estate

    All of the valuable things an individual owns, such as real estate, ...
RELATED FAQS
  1. What is a family Limited Liability Company (LLC)?

    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
  2. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
  3. What is the difference between an intervivos trust and a testamentary trust?

    Estate planning offers tools to establish and maintain effective control over cash, investment and real estate assets during ... Read Full Answer >>
  4. What is an IRS letter audit / audit by correspondence?

    Every year, the Internal Revenue Service (IRS) sends numerous notices to taxpayers. Letter audit, or audit by correspondence, ... Read Full Answer >>
  5. When might an abatement be granted by the IRS?

    The Internal Revenue Service (IRS) frequently imposes interest and penalties due to the late filing of a tax return, underpayment ... Read Full Answer >>
  6. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    The differences between a Chartered Financial Analyst (CFA) and a Certified Financial Planner (CFP) are many, but comes down ... Read Full Answer >>
Related Articles
  1. Taxes

    Safe Tax Planning For High-Net-Worth Filers

    Planning is essential for the affluent seeking tax breaks. Get to know the legal strategies for saving more.
  2. Options & Futures

    Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  3. Options & Futures

    Leaving Inheritance To Children Easier Said Than Done

    Consider your own retirement needs when deciding whether to leave an inheritance.
  4. Retirement

    How to Retire in Monaco

    If you’re well off and you’ve always dreamed of living on the Riviera, glamorous Monaco might be your ideal retirement destination.
  5. Taxes

    A Quick Guide to High-Net-Worth Estate Planning

    A quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.
  6. Personal Finance

    Living Trusts vs. Simple Wills: A Comparison

    A look at wills versus living trusts and when to choose one over the other.
  7. Retirement

    How to Establish a Blind Trust

    ...and the reasons why you might want to do so.
  8. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  9. Taxes

    Estate Planning for a Surviving Spouse

    Estate planning for surviving spouses can be difficult for a number of reasons, so it's important to have good support and financial advice.
  10. Professionals

    Gay Marriage Ruling: Its Impact on Estate Planning

    Same-sex couples now face the same legal and financial issues as heterosexual couples; some may need to adopt simpler, more mainstream financial plans.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!