Although many people arrange to pay for their own funerals from their estate's funds, some estates aren't large enough to cover the costs. In such cases, a friend or relative may pay for the funeral.
Only an estate can deduct funeral expenses from its taxable income. If you pay for a funeral for a relative or friend, you can't deduct these expenses from your own taxes.
Funeral Expenses Tax Deductible for Estates Only
According to Internal Revenue Service guidelines, funeral expenses are not deductible on any individual tax return, including the decedent's final return. Though some taxpayers may assume they could include these expenses as a medical deduction on the decedent's final income tax return, the IRS allows taxpayers to deduct only those medical expenses that they paid in order to prevent or treat an illness, and funeral expenses don't meet these requirements.
If the IRS requires the decedent's estate to file an estate tax return, the estate's representative may be able to include funeral expenses as a deduction. As of the 2017 tax year, only estates with gross values of $5,490,000 or more must file a federal estate tax return, and that cutoff doubles to $11,180,000 as of the 2018 tax year. The estate's gross value is the total value of all assets it contains. If an estate must file a tax return, the return is due nine months from the decedent's date of death.
If the IRS requires you to file an estate tax return, list deductible funeral expenses on Form 706. Deduct funeral expenses by completing Schedule J and attaching it to Form 706. Include an itemized list of funeral expenses in section A of Schedule J, and enter the total of all funeral expenses at the bottom of the section. Don't include any funeral expenses for which the estate received reimbursement from any source. As with any expenses you'd claim on a tax return, keep receipts or other documentation of what the estate paid for the funeral when claiming funeral expenses from estate taxes.
Other Deductions and Filings for Estates
In addition to funeral expenses, executors can deduct the value of any property that passed to charity, the value of any property that passed to the decedent's spouse, the amount of any taxes paid to a state and the amount of any debts the decedent owed at his death from the taxable value of the estate. Estates that earn income must sometimes file income tax returns. However, funeral expenses are not deductible on these returns.
Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.