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February 5, 2018 Beyond The Dash

Are Funeral Costs Tax Deductible in the US?

Do tax exemptions apply to costs like burial, cremation and floral arrangements?

Are Funeral Costs Tax Deductible in the US?
There are many unexpected costs that arise when someone has passed away. Find out which ones you can write off at tax time. (Shutterstock)

When taxpayers are filing their tax returns, they often wonder if any funeral expenses paid in that fiscal year could possibly reduce the tax they owe. The Internal Revenue Service (IRS) rules state that most individuals will not qualify for funeral expense deduction, unless the expenses were paid out of the funds of an estate. 

Short answer

The only entity that can reap a tax benefit for funeral costs is the deceased's estate. If the funeral expenses were paid by heirs, friends, charity initiatives, or any source other than the deceased person's estate, they do not qualify for any tax deductions.

Who doesn't qualify for deductions 

An individual taxpayer is not entitled to deduct funeral expenses on their tax return. The IRS allows exemptions for certain medical expenses, when costs were incurred to treat a disease or condition, but not expenses that incurred after death.

Information for executors

If you are administering an estate as an executor, you should pay the funeral expenses out of estate funds. At tax time, claim those expenses when the deceased person's final taxes are filed.

However, there is such a large tax exemption for most estates, that funeral exemptions are rarely beneficial. Although the exact exemption from estate tax varies by year, an estate must be worth millions in order to be liable for tax. In 2017, the limit was $5.49 million. 

Reporting funeral expenses to the IRS 

If you are administering an estate, you can use Form 706 when filing the final estate taxes—this form will determine tax liability of the estate. You will also need to complete Schedule J, which is attached to Form 706. In order to properly report the funeral expenses, you should list them on Line 1 of Section A, and mention the total amount under the appropriate head. Make sure all the other requirements are complete before filing the tax return to the tax authorities to avoid any inconvenience. 

Which costs are deductible? 

Any funeral cost relevant to the burial or funeral ceremony is a deductible funeral expense, provided it was paid out of the funds of the estate. These costs also include the cost of hiring a funeral director, interment of the body in the casket and grave preparation fees. 

Final word  

Estate tax planning can be a tough task. In order to claim the deductions and file the tax return without any error, it is recommended that you to hire the services of a tax advocate. 

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