Many people ask if funeral expenses are tax-deductible. The answer depends on who is paying and what kind of estate is left behind, says MSN’s recent article entitled “10 Tax-Deductible Funeral Service Costs.”
Unfortunately, funeral expenses are not tax-deductible for individual taxpayers. This means that you can’t deduct the cost of a funeral from your individual tax returns. While individuals cannot deduct funeral expenses, eligible estates may be able to claim a deduction, if the estate paid these costs. However, if your estate is below the $12,060,000 federal estate tax exemption limit (2022 tax year), you can’t use this deduction.
If your estate is above the $12,060,000 federal estate tax exemption limit, you’ll want to claim eligible deductions to reduce taxes. To claim funeral expenses on the estate’s tax return, you’ll need to complete Schedule J of Form 706. All of the eligible expenses should be itemized to adequately describe the purpose of each expenditure. If the estate was reimbursed for any funeral costs, that reimbursement must be deducted from your total tax deduction. This includes payments from Social Security, Veterans Affairs, final expense insurance and other sources.
If you are eligible to deduct funeral expenses on your estate’s tax returns, note that not all funeral expenses are tax-deductible. The following expenses qualify for a tax deduction for eligible estates, as long as they are reasonable in nature:
- Embalming or cremation
- Casket or urn
- Burial plot and burial (internment)
- Green burial services
- A tombstone, gravestone, or other grave marker
- Funeral home facility costs and director fees
- Funeral service arrangement costs, including floral and catering services
- Transportation costs for the deceased and immediate family members
- Religious leader service fees; and
- Catering food at the reception.
Keep a copy of receipts for all expenses. This makes it easier to keep track of the total funeral cost. You’ll also need them in the event of an audit.
Non-deductible funeral expenses include travel expenses for funeral guests and any costs paid by a burial or final expense insurance policy or any other life insurance policy.