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.
Sign up for Kiplinger’s Free E-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.
-
Higher Summer Costs: Tariffs Fuel Inflation in JuneTariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Don’t Miss Alabama Tax-Free Weekend 2025Tax Holiday Ready to save? Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Higher Summer Costs: Tariffs Fuel Inflation in June
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Don’t Miss Alabama Tax-Free Weekend 2025
Tax Holiday Ready to save? Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Parents Prepare: Trump's Megabill Brings Three Crucial Tax ChangesTax Changes Are you a parent? The so-called ‘One Big Beautiful Bill’ (OBBB) impacts several key tax incentives that can affect your family this year and beyond.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
Mississippi Tax-Free Weekend 2025Tax Holiday Just in time for Prime Day, Mississippi celebrated a tax holiday in July. Find out what back-to-school essentials were included.
-
Ten Cheapest Places to Live in VirginiaProperty Taxes The Commonwealth of Virginia has some cheap places to live. Here are a few if you hate paying property taxes.
-
Elon Musk and Most Taxpayers Don't Like What's in Trump's 'Big Beautiful Bill'Tax Policy President Trump is betting big on his newest tax cuts, signed into law on July 4. But not everyone is on board.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'Tax Deductions The GOP tax bill could make hidden homeowner costs worse for you. Here’s how.
