Can Funeral Expenses Be Deducted on a Federal Income Tax?

The funeral of a loved one is a time when many people would prefer not to think of money or taxes, but a funeral can be expensive. The IRS makes it difficult to deduct funeral expenses, but it is possible to exclude money spent on a funeral from the decedents gross estate.

Medical Expenses

Funeral expenses are not a deduction you can generally make on your income taxes. They are expressly excluded as a medical expense deduction. Paying for the funeral of a relative or loved one does not provide a deduction for personal income tax purposes.

Gross Estate

Some costs of a funeral can be excluded from the decedents gross estate, which is used to determine whether the estate owes any estate taxes. Its important to note that the deduction is only counted toward whether or not the value of the estate exceeds the exemption amount, as reported on Form 706. If the estate owes estate taxes, the funeral expenses will be deducted from the taxable estate on Form 706.

Non-Deductible Expenses

The fact that funeral expenses can help lower the value of the gross estate provides an incentive to overspend on the funeral if the estate's value is near the limit of the exemption amount. But not all money spent is deductible as funeral expenses. Travel expenses for family members, new clothing to wear at the funeral and other expenses incidental to attendance at the funeral cannot be deducted on Form 706, according to Peter L. Klenk and Jeanna Lam, who are both lawyers.

Deductible Expenses

Certain types of expenses are almost always deductible from the gross estate as funeral expenses. The cost of the casket, burial vault or urn; fees for the burial itself; burial clothes for the deceased; donations to religious officiants; flowers provided by the estate; food for mourners and costs of transporting the deceased to the place of burial are all legitimate funeral expenses. The cost of perpetual care at a cemetery or mausoleum can also be deducted. The IRS may object to the extent of these deductions if not "reasonable," according to Peter Klenk. The extent of funeral expense deductions may also be limited by state law.

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