Close family members are exempt from New Jersey inheritance tax, but other inheritors might have to pay.
By Mary Randolph, J.D. UC Berkeley School of Law
Updated by Jeff Burtka, Attorney George Mason University Law School
New Jersey is one of a handful of states that collects an inheritance tax. If you're a New Jersey resident, or if you own real estate or tangible property located in New Jersey, the people who inherit your property might have to pay a tax on the amount that they inherit. Whether they will have to pay the tax, and how much they will have to pay, depends on how closely they were related to you—the closer the family connection, the lower the tax rate.
(Note: New Jersey used to collect a state estate tax as well, but for individuals who died in 2018 or later, the state estate tax no longer applies.)
- New Jersey Inheritance Tax Rates and Exemptions
- Other Inheritance Tax Exemptions
- Gifts Made During Your Lifetime
- Filing the New Jersey Inheritance Tax Return
- Inheritance Tax Waivers
New Jersey Inheritance Tax Rates and Exemptions
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 pay no inheritance tax. This group includes the deceased person's:
- spouse, domestic partner, or civil union partner
- parent or grandparent
- child (biological, adopted, or mutually acknowledged)
- stepchild (but not step-grandchild or great-step-grandchild), and
- grandchild or other lineal descendants of a child.
(N.J. Stat. §§ 54:34-2, 54:34-2.1 (2024).)
Class B was deleted when New Jersey law changed.
Class C beneficiaries pay inheritance tax on amounts over $25,000. (The first $25,000 of property inherited by someone in Class C isn't taxed.) This group includes the deceased person's:
- brother or sister
- child's spouse or civil union partner, and
- child's surviving spouse or civil union partner (if the deceased person's child is deceased).
(N.J. Stat. § 54:34-2 (2024).)
The rate of tax depends on the amount inherited. As mentioned, amounts up to $25,000 aren't taxed. After that, the rates are as follows:
- For any amount above $25,000 and up to $1.1 million: 11%
- For any amount above $1.1 million and up to $1.4 million: 13%
- For any amount above $1.4 million and up to $1.7 million: 14%
- Over $1.7 million: 16%
(N.J. Stat. § 54:34-2 (2024).)
Class D includes everyone who doesn't fall into Class A, C, or E. There's no special exemption amount, and the applicable tax rates are:
- First $700,000: 15%
- Over $700,000: 16%
(N.J. Stat. § 54:34-2 (2024).)
Class E beneficiaries are exempt from inheritance tax. This group includes the State of New Jersey or any of its political subdivisions for public or charitable purposes, educational institutions, churches, hospitals, public libraries, and most 501(c)(3) charities. (N.J. Stat. § 54:34-4 (2024).)
Other Inheritance Tax Exemptions
Other inheritance tax exemptions exist, regardless of the inheritor's classification. The New Jersey inheritance tax isn't collected on:
- transfers of less than $500
- life insurance proceeds paid to a named beneficiary
- payments from the New Jersey Public Employees Retirement System, the New Jersey Teachers' Pension and Annuity Fund, or the New Jersey Police and Firemen's Retirement System
- federal Civil Service Retirement benefits payable to a beneficiary other than the deceased person's estate, and
- annuities payable by the U.S. government under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan to a beneficiary other than the estate.
(N.J. Stat. §§ 54:34-1, 54:34-4 (2024); N.J. Admin. Code §18:26-6.14 (2024).)
Gifts Made During Your Lifetime
If you make gifts that are a "material part" of your estate 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." (N.J. Stat. § 54-34-1 (2024).)
These rules are meant to prevent you from avoiding the inheritance tax by giving away large amounts of property just before you die.
Filing the New Jersey Inheritance Tax Return
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, within eight months of the death. Interest accrues on any unpaid taxes after the deadline. The state can grant an extension of up to four months to file the return, but the tax itself must still be paid by the original deadline. (N.J. Stat. § 54:35-3 (2024); N.J. Admin. Code §18:26-9.1 (2024).)
Inheritance Tax Waivers
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 an Affidavit for Real Property Tax Waiver. If the waiver is granted, an inheritance tax return doesn't have to be filed.
Further Reading
