A Special Deduction
Don't miss this easily overlooked deduction: estate taxes paid on an inherited traditional IRA.
If you withdrew funds in 2007 from a traditional IRA you inherited, you might deserve a special tax deduction. You qualify if the person from whom you inherited the account had an estate large enough to trigger the federal estate tax.
Say you inherited a $50,000 IRA, which, because it was included in your mother's taxable estate, boosted the estate tax bill by $20,500. Although you have to pay tax as you pull money out of the IRA, you also get an income tax deduction for that $20,500.
If you pulled the full $50,000 out in 2005, you get the full deduction on your 2005 return. If you withdrew just $25,000 last year, you deduct just half of the estate tax bill attributable to the IRA: $10,250 in this example.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
This miscellaneous deduction for federal estate tax on "income in respect of a decedent" is taken on line 28 of Schedule A. It is not subject to the 2% rule that limits the deduction of most other miscellaneous expenses.
-
Do You Pay Property Taxes in Tennessee? What You Need to Know in 2026Property Taxes State lawmakers are moving to ban state property taxes, but can they stop the local rate spike? Here's how 2026 could lower your Tennessee property tax bill.
-
Should You Be Investing in Emerging Markets?Economic growth, earnings acceleration and bargain prices favor emerging markets stocks right now.
-
I have a secret second family. Can my estate cover everyone confidentially?We asked estate planning experts how to keep this skeleton in the closet.
-
12 Tax Strategies Every Self-Employed Worker Needs in 2026Your Business Navigating the seas of self-employment can be rough. We've got answers to common questions so you can have smoother sailing.
-
A Free Tax Filing Option Has Disappeared for 2026: Here's What That Means for YouTax Filing Tax season officially opens on January 26. But you'll have one less way to submit your tax return for free. Here's what you need to know.
-
2026 State Tax Changes to Know Now: Is Your Tax Rate Lower?Tax Changes As a new year begins, taxpayers across the country are navigating a new round of state tax changes.
-
When Do W-2s Arrive? 2026 Deadline and 'Big Beautiful Bill' ChangesTax Deadlines Mark your calendar: Feb 2 is the big W-2 release date. Here’s the delivery scoop and what the Trump tax changes might mean for your taxes.
-
Are You Afraid of an IRS Audit? 8 Ways to Beat Tax Audit AnxietyTax Season Tax audit anxiety is like a wild beast. Here’s how you can help tame it.
-
States That Tax Social Security Benefits in 2026Retirement Tax Not all retirees who live in states that tax Social Security benefits have to pay state income taxes. Will your benefits be taxed?
-
10 Cheapest Places to Live in WashingtonProperty Tax Is Washington your go-to ski destination? These counties combine no income tax with the lowest property tax bills in the state.
-
3 Major Changes to the Charitable Deduction for 2026Tax Breaks About 144 million Americans might qualify for the 2026 universal charity deduction, while high earners face new IRS limits. Here's what to know.
