Funerals are emotional and stressful enough without the worry of financial issues. Unfortunately, funerals can be quite expensive. The average bill to lay a loved one to rest in the USA is between $7,000 and $12,000 (2021).
These costs include the burial, basic service fees, the transportation of the deceased to the funeral home, a casket, embalming, and other preparations.
With this build-up of bills, there is no surprise that people look to find the most affordable options available and if the expenses are tax deductible.
Currently, funeral expenses are not tax deductible for individuals. These expenses are only tax-exempt for certain estates. Estates that are worth $11.58 million or more must file federal tax returns but only in 13 states. Because of this, you can not claim tax deductions.
The values of estates that need to pay federal or state taxes are extremely high. Therefore, claiming funeral expenses is typically uncommon. As with any tax-related decisions, it is always best to consult a tax professional.
What Estates Can Claim Federal Tax Deductions For Funeral Costs?
Not all estates pay federal taxes. This is why many can not get tax deductions on certain funeral costs.
The Internal Revenue Service (IRS) states that those with a gross value of at least $11.58 million are required to file federal tax returns. This must be done using the IRS Form 706.
To find out how much an estate’s gross value is, you should add up the value of assets owned by the deceased person. If this total is under $11.48 million, you will not need to file a federal tax return but can not claim any funeral expenses.
What Funeral Expenses Are Tax Deductible?
Individuals can not claim tax write-offs for funeral costs. Only estates can do so. However, some of the costs that qualify for tax deductions include:
- Costs of funeral home facilities
- The fees of the funeral home director
- The funeral service arrangement fees such as catering and floral services
- The transportation of the deceased costs
- The transportation of their immediate family members (includes hearse and limousine services)
- The burial plot
- Green burials (deceased is laid to rest in a biodegradable container and interred in a gravesite)
- Minister, Rabbi, or other religious leader eulogy costs
- Tombstone, gravestone, and other grave markers
Expenses that are paid with estate funds can be deducted but you can not claim costs paid by:
- The executor
- The next of kin
- A burial or funeral insurance policy
You should keep receipts to prove that the estate paid for the funeral fees. By doing this, there will be no risk of running into problems if you are audited by the IRS.
However, the IRS is not obliged to accept each of your requested write-offs. Because funerals cost an average of $7,000 to $12,000 due to certain services, the IRS may not accept or honor every single claim.
These include more expensive funeral services and receptions.
Which Funeral Expenses Are Not Tax Deductible?
Several funeral costs can be personal expenses. However, these are not eligible for tax deductions by the estate. Individuals can not claim these expenses on personal tax returns either. Examples of these expenses are:
- The costs that have been paid by a final expense insurance policy or other life insurance policies
- The travel expenses for numerous funeral guests
- The fees paid by certain government programs or by grants. These include burial benefits that have been paid by the Social Security Lump Sum Death benefit or Veteran Administration (VA)
How Do You Claim Tax Deductions For Funeral Expenses?
If you’re an executor, you can claim deductions by completing Schedule J on IRS Form 706. However, we recommend that you hire a tax professional before you complete any kind of IRS form.
To claim write-offs for funeral expenses, follow these steps:
- Find Schedule J on page 17 of Form 706
- Fill in your itemized funeral costs on line 1 of Section A. (The costs here are the ones discussed above in the “What funeral expenses are tax deductible?” section of our guide)
- Enter the full amount on the “total funeral expenses” line
You will have to input this number into fees that are not related to the funeral costs. To find your final tax deduction amount:
- Add your administration expenses paid for settling the deceased’s estate to lines 1 to 3 in Section B, page 17. (These are the overall costs of the attorney, the executor, and accountable fees)
- Next, itemize the other costs paid to settle the estate on line 4
- Add up the total costs to the value of “total funeral expenses.” When you have the final amount, enter it at the bottom of the page Schedule J, line 4, page 3
On occasions, estates that earned income must file an income tax form using IRA 1041. But these forms are not used to claim any tax reductions that are funeral-related.