28 Mar What do I owe in tax on this inheritance from my mom?

Q. My mom recently passed away. She lived in New York and I will inherit some money from a traditional IRA, approx. $8,000. I am recently retired and I am planning to take the money as a check made directly to me. I know I need to have federal taxes taken out, but I don’t know how much New Jersey taxes need to be taken out. My income should be around $60,000 for 2023.
— Heir

A. We’re sorry to hear about your mom.

And we’re glad you’re trying to plan ahead for your tax bill.

Based on your information, your gross income falls within the range of $40,001 to $75,000, which has a New Jersey state tax rate of 5.525 percent, said Martin D. Hauptman, an attorney and partner in the trust and estates, and taxation practice groups with Mandelbaum Salsburg in Roseland.

However, you may be eligible for certain exemptions and deductions that can lower your taxable income and reduce the amount of taxes you owe, he said.

Importantly, let’s say upfront that to accurately determine your tax liability, you should consider consulting a tax professional.

You said you were having money withheld for the federal taxes owed. You may want to have a portion of the inherited money withheld for state taxes to avoid owing a large tax bill when you file your taxes, he said.

“New Jersey state tax law allows for various deductions, such as personal exemptions, senior 65+ exemptions, blind or disabled exemptions, veteran exemptions, dependent exemptions, and dependent attending college exemptions,” Hauptman said. “You may also be eligible to deduct certain medical expenses, alimony and separate maintenance payments, qualified conservation contributions, and organ/bone marrow donation expenses.”

New Jersey also provides property tax deductions/credits for homeowners and tenants, as well as three new income tax deductions for taxpayers with gross income under $200,000, as part of the New Jersey College Affordability Act, he noted.

Given that you could be eligible for some of the deductions, it’s important to carefully review all available deductions to determine which ones apply to you and can reduce your tax liability, he said.

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This story was originally published on March 28, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.