If you paid for funeral expenses during the tax year, you may wonder whether you can deduct these costs on your federal income tax return. According to IRS regulations, most individuals will not qualify to claim a deduction for these expenses. However, an estate might be able to deduct these and other types of expenses.
Who cannot deduct funeral expenses?
Individual taxpayers cannot deduct funeral expenses on their tax return. While the IRS allows deductions for medical expenses, funeral costs are not included. Qualified medical expenses must be used to prevent or treat a medical illness or condition.
Deducting funeral expenses as part of an estate
If you are settling an estate, you may be able to claim a deduction for funeral expenses if you used the estate's funds to pay for the costs. Many estates do not actually use this deduction, since most estates are less than the amount that is taxable. However, executors of estates that are subject to tax can use various deductions, including funeral expenses, to reduce the estate's overall taxable income.
Reporting funeral expenses on Form 706
If you administer an estate you use Form 706, United States Estate (and Generation Skipping Transfer) Tax Return, to calculate the estate's tax liability. To report funeral expenses, you must complete Schedule J, Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims, which is attached to Form 706. On this schedule, you should itemize the funeral expenses on Line 1 of Section A and enter the total under Total funeral expenses.
Accounting for reimbursed expenses
If the estate was reimbursed for any of the funeral costs, you must deduct the reimbursement from your total expenses before claiming them on Form 706. This includes government payments such as Social Security or Veterans Affairs death benefits. Such reimbursements are not eligible for a deduction.
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