# Income in Respect of a Decedent (IRD): Definition and Taxes

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## What Is Income in Respect of a Decedent (IRD)?

Income in respect of a decedent (IRD) refers to untaxed income that a [decedent](https://www.investopedia.com/terms/d/decedent.asp) had earned or had a right to receive during their lifetime. Taxes on IRD are owed by the individual beneficiary or entity that inherits this [income](https://www.investopedia.com/terms/i/income.asp).

However, IRD also counts toward the decedent’s [estate](https://www.investopedia.com/terms/e/estate.asp) for federal estate tax purposes, potentially drawing a double tax hit. Fortunately, the beneficiary may be able to take a [tax deduction](https://www.investopedia.com/terms/t/tax-deduction.asp) for the estate tax paid on IRD. The [beneficiary](https://www.investopedia.com/terms/b/beneficiary.asp) must declare IRD as income for the year in which they receive it.

### Key Takeaways

*   Income in respect of a decedent (IRD) refers to untaxed income that a decedent had earned or had a right to receive during their lifetime.
*   IRD is taxed as if the decedent is still living.
*   Beneficiaries are responsible for paying taxes on IRD income under most circumstances. 

## Understanding Income in Respect of a Decedent (IRD)

IRD is defined in [Internal Revenue Code](https://www.investopedia.com/terms/i/internal-revenue-code.asp) Section 691. Sources of income include the following:

*   Uncollected salaries
*   Wages
*   [Bonuses](https://www.investopedia.com/terms/b/bonus.asp)
*   Commissions
*   Vacation pay
*   Sick pay
*   Uncollected rent
*   [Retirement income](https://www.investopedia.com/retirement/retirement-income-planning/)

Other sources of IRD are:

*   Payments for crops
*   [Interest](https://www.investopedia.com/terms/i/interest.asp) and [dividends](https://www.investopedia.com/terms/d/dividend.asp) accrued
*   Distributions from certain [deferred compensation](https://www.investopedia.com/terms/d/deferred-compensation.asp) and [stock option](https://www.investopedia.com/terms/s/stockoption.asp) plans
*   [Accounts receivable](https://www.investopedia.com/terms/a/accountsreceivable.asp) of a [sole proprietor](https://www.investopedia.com/terms/s/soleproprietorship.asp)
*   Gains from the sale of [property](https://www.investopedia.com/terms/p/property.asp) (if the sale is deemed to occur before death, but proceeds are not collected until after death)

> **Important**
>
> IRD is also any income from sales commissions and individual retirement account (IRA) distributions owed to the decedent at the time of their death.

## How IRD Is Taxed

IRD is taxed in the same way it would have been had the decedent received the money while living. For example, [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) are taxed at the [capital gains rate](https://www.investopedia.com/terms/c/capital_gains_tax.asp), and uncollected compensation is taxed as [ordinary income](https://www.investopedia.com/terms/o/ordinaryincome.asp) on the beneficiary’s tax return for the year they received it. There is no [step-up in basis](https://www.investopedia.com/terms/s/stepupinbasis.asp) for IRDs.

## How IRD Works for IRAs and 401(k)s 

Other common examples of IRD are distributions from tax-deferred [qualified retirement plans](https://www.investopedia.com/terms/q/qrp.asp) (such as [401(k)s](https://www.investopedia.com/terms/1/401kplan.asp) and traditional [individual retirement accounts (IRAs)](https://www.investopedia.com/terms/i/ira.asp)) that are passed on to a beneficiary. If an individual dies leaving a $1 million IRA to their beneficiary, the beneficiary will be responsible for paying taxes on any distributions made from the account.

The beneficiary may have to start taking [required minimum distributions (RMDs)](https://www.investopedia.com/terms/r/requiredminimumdistribution.asp) at a certain point.

### Spouses

A living spouse who is the sole beneficiary has certain rights not granted to another type of beneficiary. For example, a spouse can roll over the decedent’s IRA assets into their own IRA and postpone RMDs until age 73. Any beneficiary, spouse or otherwise, must follow [specific RMD rules](https://www.investopedia.com/articles/personal-finance/102815/rules-rmds-ira-beneficiaries.asp) and is liable for applicable taxes on distributions.

The age for RMDs was raised to 72 with the passage of the [Setting Every Community Up For Retirement Enhancement (SECURE) Act](https://www.investopedia.com/secure-act-4688468) in December 2019. Then, in December 2022, the passage of the [SECURE 2.0 Act](https://www.investopedia.com/secure-2-0-definition-5225115) raised the age to 73.

### Impact on Estates

If the decedent died on or after reaching the age of RMDs, their RMD for the year of death may factor into their estate (for instance, if no specific beneficiaries were designated in the account file/paperwork for the retirement account where it was held). If the amount of the RMD were to push the decedent’s estate beyond the federal exclusion, an [estate tax](https://www.investopedia.com/terms/e/estatetax.asp) would kick in. The federal exclusion amount for 2025 is $13.99 million.

To try to minimize this impact, individuals and married couples employ [estate planning strategies](https://www.investopedia.com/articles/personal-finance/070715/quick-guide-highnetworth-estate-planning.asp) that transfer assets to trusts. One option is a [credit shelter trust](https://www.investopedia.com/terms/c/creditsheltertrust.asp), which postpones estate taxes until the death of the surviving spouse.

## How Do I Report IRD?

If you as a beneficiary received such income, you’ll report it on your personal income [tax return](https://www.investopedia.com/terms/t/taxreturn.asp) for the year that you received it.

## What’s the Difference Between Inheritance and IRD?

[Inheritance](https://www.investopedia.com/terms/i/inheritance.asp) is property bequeathed to you by a decedent. Income in respect of a decedent, or IRD, is income that was owed to the decedent but wasn’t received by them before their death. That income may go to the beneficiary.

For example, a required minimum distribution from an IRA (that you are to inherit) that was to be taken by the decedent the year the decedent passed away will have to be taken by you. While you don’t normally owe taxes on inheritance, you will owe taxes on IRD that you receive.

## How Is a Beneficiary Taxed on IRD That’s a Required Minimum Distribution (RMD)?

A beneficiary is taxed just as the decedent would have been. For example, an RMD from a traditional IRA would have been reported by the decedent as regular income and taxed as such. The beneficiary will report the RMD in the same way and will owe tax that corresponds to their income [tax bracket](https://www.investopedia.com/terms/t/taxbracket.asp).

## The Bottom Line

IRD is income that is owed to an individual who dies before receiving it. If a beneficiary receives this money, they will owe taxes on it.

If the IRD generates a tax liability for the decedent’s estate, a beneficiary may be able to claim a deduction for estate taxes connected to the IRD amount.

> **Article Sources**
>
> 1.  Internal Revenue Service. “[Publication 559: Survivors, Executors, and Administrators](https://www.irs.gov/pub/irs-pdf/p559.pdf).”
>     
> 2.  U.S. Code. “[26 USC 691: Recipients of Income in Respect of Decedents](https://uscode.house.gov/view.xhtml?req=%28title:26%20section:691%20edition:prelim%29).”
>     
> 3.  Internal Revenue Service. “[Section 691—Recipients of Income in Respect of Decedents](https://www.irs.gov/pub/irs-drop/rr-05-30.pdf).”
>     
> 4.  Internal Revenue Service. “[Retirement Plan and IRA Required Minimum Distributions FAQs](https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions).”
>     
> 5.  Congress.gov. “[H.R.1994—Setting Every Community Up for Retirement Enhancement Act of 2019: Text](https://www.congress.gov/bill/116th-congress/house-bill/1994/text).”
>     
> 6.  Congress.gov. “[Consolidated Appropriations Act, 2023: Division T—SECURE 2.0 Act of 2022](https://congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf).” Page 817.
>     
> 7.  Internal Revenue Service. “[IRS Releases Tax Inflation Adjustments for Tax Year 2025](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025).”