The information in this article is up to date through tax year 2019 (taxes filed in 2020).
Individual taxpayers can’t deduct funeral or cremation expenses on their federal tax returns, but if the deceased person has an estate worth over $11M, then the estate can claim deductions for certain costs.
How to file funeral deductions for estates
Executors of estates with values above $11.18M must file IRS form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Even executors of estates below this value sometimes file form 706 in order to lock in the fair market value of assets within the estate. This comes in handy when settling the details of transferring the estate to a spouse, or non-spouse beneficiary.
In order to deduct funeral expenses, filers should fill out Schedule J which is attached to IRS form 706.
What funeral expenses are deductible?
Any expenses directly related to the burial and memorial service can be deducted as long as they are directly and reasonably related to the homegoing ceremony. For example:
- Body preparation services including embalming or cremation
- Administrative costs like hiring a funeral director
- Internment of the body in a casket or cremation urn
- Police escort
- Decorative and ceremonial touches like floral arrangements, catering services or musical accompaniment
Filing estate taxes by state
Certain states require estate taxes, even in scenarios when they are exempt from the federal estate tax. These states often have exemption levels much lower than the federal ones so it’s possible, even probable in these states, that IRS form 706 is required to be filed with the state but not the federal government. These states include:
- District of Columbia
- Illinois (for 2009 and prior years and 2011 and future years)
- Kansas (for 2009 and prior years)
- New York