Who Must File a NJ Inheritance Tax Return?

The New Jersey Inheritance Tax is a state-level tax on assets transferred from a deceased person to their beneficiaries. Whether a return must be filed and how much tax is owed depends on the relationship between the decedent and the beneficiary. Unlike an estate tax, which is based on the total value of an estate, the inheritance tax is paid by the person receiving the assets. New Jersey repealed its separate estate tax for individuals dying on or after January 1, 2018.

Determining Filing Requirements by Beneficiary Class

The obligation to file a New Jersey Inheritance Tax return is determined by a beneficiary classification system. The state assigns beneficiaries to different classes based on their relationship to the decedent, with each class having distinct tax rates and exemption amounts.

Class A beneficiaries are entirely exempt from the New Jersey Inheritance Tax. This group includes the decedent’s spouse, domestic partner, civil union partner, children, stepchildren, grandchildren, parents, and grandparents. Because of this complete exemption, individuals in this class do not have to file an inheritance tax return or pay any tax.

Class C beneficiaries include the decedent’s siblings and the spouse or surviving spouse of a decedent’s child. The first $25,000 of the total inheritance is exempt, but a return must be filed if the net inheritance exceeds this amount. The tax rates for Class C are:

• 11% on amounts over $25,000 up to $1.1 million
• 13% on amounts over $1.1 million up to $1.4 million
• 14% on amounts over $1.4 million up to $1.7 million
• 16% on amounts over $1.7 million

Any beneficiary not in Class A, C, or E is a Class D beneficiary. This category includes nieces, nephews, cousins, friends, and other unrelated individuals. For Class D beneficiaries, a return is required and tax is imposed on any inheritance of $500 or more. The tax rates are 15% on the first $700,000 and 16% on any amount after that.

Class E beneficiaries are qualified charitable, religious, and educational institutions, as well as government entities. These beneficiaries are completely exempt from the tax. However, the estate may still need to file a return to document the transfers and obtain tax waivers to release the assets.

Information and Documents Needed for the Return

The person responsible for filing must compile detailed information. This includes the decedent’s full name, Social Security number, date of death, and last legal address. A complete list of every beneficiary is also required, detailing their name, address, relationship to the decedent, and the assets they will inherit.

An inventory of all the decedent’s assets must be created with the fair market value of each item as of the date of death. These assets include New Jersey real estate, bank accounts, and investment portfolios. A corresponding list of any debts, including mortgages, loans, funeral expenses, and estate administration costs, is also needed.

The primary form for this process is Form IT-R, the Inheritance Tax Return for a Resident Decedent. This form is used when the deceased was a legal resident of New Jersey. For estates of non-residents who owned property in the state, Form IT-NR must be used. These forms can be found on the New Jersey Division of Taxation’s website.

With the gathered information, the filer completes the appropriate form and its attached schedules. The asset inventory is used to fill out schedules that categorize property, and beneficiary information is used to calculate the tax liability for each non-exempt recipient.

The Filing and Payment Process

The responsibility for filing the inheritance tax return falls to the executor or administrator of the estate. If the decedent did not have a will or an appointed administrator, the legal responsibility shifts to the beneficiaries who received the property. They become personally liable for ensuring the tax is filed and paid correctly.

The deadline for filing the inheritance tax return is eight months from the decedent’s date of death. The completed Form IT-R, along with all required schedules and supporting documents, must be mailed to the New Jersey Division of Taxation. Any tax owed must be paid when the return is filed.

Failure to pay the tax on time can result in interest charges, which accrue at a rate of 10% per year. The state also imposes a lien on a decedent’s New Jersey real estate, which remains in effect until the tax is paid. This lien prevents the property from being sold or transferred with a clear title.

After the Division of Taxation reviews the filing and the tax is fully paid, it issues tax waivers. These documents are official proof that the state’s tax claim has been satisfied. Financial institutions and real estate title companies require these waivers before they will release funds or finalize the sale of a property.