With so many deductions listed by the Internal Revenue Service (IRS), you may be wondering if you can deduct funeral expenses on your tax forms or 1040. The answer may not sound very encouraging, but there is an exception included that might allow for deductions.
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Can You Claim Funeral Expenses On Taxes?
Funeral expenses are not tax-deductible. As stated by the IRS, paying for funeral or cremation expenses out of your pocket is not tax-deductible. For most individuals, this means that whether you pay in part or in full out of your pocket, you cannot deduct the expense on the federal tax form.
Many individuals may be confused by this statement as medical expenses are listed as tax-deductible per IRS rules and regulations. However, the IRS does make a distinction between paying medical expenses and those for a funeral so you can’t write off the expenses.
However, there is one exception that provides funeral expenses tax deduction if the money came from the estate of the deceased.
How do Estates qualify for Funeral Tax Deductions?
If an estate is being settled, it’s possible to make a funeral expenses tax-deductible claim if the funds to pay the burial costs came from the estate itself. In most cases, the estate of the deceased individual is simply not large enough to be taxable in the first place. However, if the estate does qualify to be taxed, then the executors who would be subject to the tax may pay for funeral expenses and gain a tax benefit in return.
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How Does It Work?
The administrator of the estate uses Form 706, which covers United States Estate (and Generation-Skipping Transfer) for Tax Returns. This is used to calculate the tax liability of the estate. Schedule J of the form lets you calculate the expenses that are incurred. This is attached to Form 706 and must be completed for you to itemize the funeral expenses which should be placed on Section A, Line 1.
Enter the total amount of funeral expense and then subtract the expected deduction which is found on the form itself. Keep in mind that if the estate was reimbursed for any of the costs for the funeral, you must deduct that from the total expenses.
For example, if someone contributed $1,000 to help pay the funeral costs, you must deduct from the total cost that amount.
Who May Assist in Paying for Funeral Expenses?
While individuals may assist, the form is focused on government agencies such as Social Security and Veteran’s Affairs which often provide death benefits to the estate. This is to help families pay for funeral expenses, but since it covers everyone, it is possible that such payments by the government will also be to estates that can cover the funeral cost itself.
So, while you may not get a tax deduction for paying funeral expenses (or cremation), if the estate of the deceased is large enough to pay taxes, then it can get a deduction per the IRS. For large estates, especially those that may support the family, deducting funeral expenses will help preserve the value of the estate.
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