New Jersey is one of only a few states that impose both an inheritance tax and a state estate tax. The inheritance tax is applies when someone who lived in New Jersey, or owned property there, leaves property to someone who isn’t a close relative. The tax rate depends on how closely the inheritors and deceased person were related.
New Jersey law puts inheritors into different groups, based on their family relationship to the deceased person.
Class A beneficiaries are exempt from the inheritance tax. They includes the deceased person’s:
Class B was deleted when New Jersey law changed.
Class C includes the deceased person’s:
The first $25,000 of property inherited by someone in Class C is not taxed. On amounts exceeding $25,000, the tax rates are:
Class D includes everyone else. There is no special exemption amount, and the applicable tax rates are:
Class E includes the State of New Jersey or any of its political subdivisions for public or charitable purposes, an educational institution, church, hospital, orphan asylum, public library, and some other nonprofit agencies. These beneficiaries are exempt from inheritance tax.
Other tax exemptions apply to all beneficiaries, in every legal classification. The New Jersey inheritance tax is not collected on:
If you make gifts in the three years before your death, those gifts are also subject to New Jersey inheritance tax, unless the recipients are exempt under the rules discussed above. They aren't taxed, however, if it can be proved that you didn't give away the money or property "in contemplation of death."
It’s the job of the personal representative (executor or administrator) of the estate to file an inheritance tax return. Only one return needs to be filed, even if several people owe inheritance tax.
New Jersey inheritance tax returns (Form IT-R, if the deceased person was a New Jersey resident), instructions, and current tax rates are available on the state Division of Taxation website. The tax return, along with copies of the will (if any) and the deceased person’s last federal income tax return, is filed with the New Jersey Division of Taxation. The return must be filed, and any tax paid, eight months from the date of death. Interest accrues on any unpaid tax. The state can grant an extension of up to four months to file the return, but the tax must still be paid by the original deadline.
Certain property can’t be transferred out of the estate until the inheritance tax is paid and the state issues a tax waiver. If no tax is due, someone who is a Class A beneficiary can file a “Request for Real Property Tax Waiver.” If the waiver is granted, an inheritance tax return doesn’t have to be filed.