Decedent (IRD) Deduction

The Income in Respect of a Decedent (IRD), or Decedent Deduction, is a crossroads where Ben Franklin’s famous quote, “nothing is certain except death and taxes” meet.

If a person dies before their IRA or 401(k) account has been drawn down, it goes to the deceased estate, but the IRS, predictably, wants its pound of flesh before anyone else. The decedent deduction comes into play if the beneficiaries have evidence to submit that federal taxes were already paid. There are a number of hoops one must jump through to utilize this deduction, so it’s usually only beneficial to very wealthy heirs.