Decedent (IRD) Deduction

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.

BREAKING DOWN '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. Income In Respect Of A Decedent ...

    Money that was due to a decedent and will pass through to the ...
  2. Decedent

    A person who is no longer living. Just as a taxpayer's possessions ...
  3. Form 706: United States Estate ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  4. Interest Rate Differential - IRD

    A differential measuring the gap in interest rates between two ...
  5. Laughing Heir

    A distant relative who has inheritance rights despite not having ...
  6. Final Return For Decedent

    The final tax return filed for an individual in the year of that ...
Related Articles
  1. Taxes

    An in Depth Look at How Inheritances Are Taxed

    The tax implications of an inheritance can be complex. Here's what beneficiaries need to know.
  2. Taxes

    Explaining Taxable Income

    Taxable income is the net of gross income and allowable deductions.
  3. Taxes

    3 Federal Income Tax Facts You Didn't Know

    Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
  4. Taxes

    How To Calculate AGI For Tax Purposes

    The first step in completing your taxes is calculating your adjusted gross income. Here’s how.
  5. Taxes

    Strategies for Protecting Your Income from Taxes

    Taxes are difficult to avoid, but there are many strategies you can find to help ward them off a bit. Here are a handful of ways to protect your income.
  6. Taxes

    The Most Controversial Tax Deductions

    When it comes to taxes, it's hard to make people happy but these deductions raised more than the average amount of controversy.
  7. Economics

    What's a Deductible?

    With insurance, a deductible is the amount of money the insured pays out-of-pocket before the insurance company pays for the loss.
  8. Taxes

    Estate Taxes: Who's on the Hook?

    Inheritance taxes can be tricky. Most people have to deal with them at a very inconvenient time. It's better to learn the laws now so you're ready later.
  9. Financial Advisors

    How Life Insurance Can Help Reduce Estate Taxes

    Inheritance is a double-edged sword, as leaving money can create estate tax burdens. Opting for a life insurance plan can help mitigate those burdens.
  10. Taxes

    Top Tax Deductions Not to Overlook

    If you want to pay as little as possible in taxes, it's important to learn about all the different credits and deductions available. Here's a primer.
RELATED FAQS
  1. How can I reduce the taxes on my inherited retirement assets?

    Many beneficiaries miss out on one of the most significant tax deductions for inherited retirement-plan assets; the income ... Read Answer >>
  2. How does the IRS want me to report the RMDs I receive from a small non-spousal inherited ...

    Aside from my own 1040, do I need to file tax returns for the stretch IRA in the name of the decedent's trust for my ... Read Answer >>
  3. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  4. How can I lower my effective tax rate without lowering my income?

    Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning tax-free ... Read Answer >>
  5. Are estate planning fees tax deductible?

    The costs of estate planning can be significant. Are any of these expenses deductible to the taxpayer or are they merely ... Read Answer >>
  6. How is cost basis calculated on an inherited asset?

    Understand how the cost basis for stocks, property and other inherited assets is calculated, and the resulting tax implications ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center