Most people know that the costs of funeral services and products are rising. Legacy Headstones is frequently asked whether funeral expenses are tax deductible. Although we cannot provide tax, legal, or accounting advice, we know that planning and preparing the funeral of a loved one can be stressful. This quick guide explores and explains some of the deductions that you or your loved one might qualify for when it’s time to prepare your federal income tax return. With this information, you can complete your upcoming taxes with confidence or know what questions to ask your tax consultant.
Are Funeral and Headstone Expenses Tax Deductible?
Whether you’re amending your taxes this year or preparing in advance for next year’s taxes, it’s never a bad idea to search for overlooked tax deductions that might save you money in the long run. According to the Internal Revenue Service (IRS), most individuals do not qualify to claim a deduction for funeral expenses. However, funeral expenses can qualify as tax deductions when the costs are paid out of a decedent’s estate.
Furthermore, the IRS typically qualifies tax deductions on medical expenses. If your loved one incurred fees from the hospital, use of medical equipment, lab services, prescriptions, medical supplies, or routine exams, you must itemize your tax return. By itemizing your tax return, you will no longer be allowed to take the standard deduction. Determine which method gives you the lowest tax rate by calculating your deductions. If itemizing those medical expenses is in your best interest, you will need to complete Form 1040, Schedule A and J, as well as Form 706.
When funeral expenses are covered by an estate with a gross value of more than five million dollars, the IRS expects the executor to file a tax return by law. The gross value of an estate is typically calculated before medical expenses or qualifying debts are paid for by the remaining funds. Easing the tax burden of the estate, the IRS allows deductions of caskets, vaults, cremation supplies, transportation to and from the funeral home or cemetery, church or officiant fees, and food expenses incurred at the funeral reception. Tax deductions will not be permitted if the decedent’s services were paid for by the U.S. Department of Veterans Affairs, but an executor can deduct from the expenses that were reimbursed while filing the U.S. Estate Tax Return.
Most people prefer to simplify their end-of-life expenses and reduce the burden on their survivors by funding funeral services through their estates. We know how difficult tax deductions can be, especially in the wake of losing a loved one. We hope that this article provides more information regarding the legality of tax-deductible funeral expenses. As always tax codes are subject to change, and we recommend asking a specialist for more information.