Are Funeral Expenses Deductible on My Taxes?
The unexpected funeral costs that arise after a death often put a strain on family finances. With a total price tag anywhere from a few thousand dollars to over ten thousand dollars, paying for a funeral out of pocket is like asking a family to buy a new car. This is a cost few families can cover outright, which is why it’s no wonder that the question of whether or not you can make funeral expenses deductible on your taxes is one that regularly pops up.
The easy answer is no. For the majority of families, the costs they must lay out for a funeral are like any other major purchase (along the lines of a car or new furniture). Funeral expenses are your responsibility, and the government won’t give you any tax breaks come April 15.
However, there are exceptions to the rule—especially if you’re dealing with a larger estate, which functions as its own legal entity, and is therefore held to different regulations.
Although you should always take with your estate lawyer or accountant before you make any decisions regarding your taxes, here are a few of the more common facts regarding funeral expenses and tax deductions.
- Large estate that are required to pay taxes are one of the only exceptions to the deductible funeral expenses rule. Because only estates worth millions of dollars (about 0.25 percent of Americans) are required to pay an estate tax, this only applies to them. In most cases, the executor to the estate or another legal professional will handle the tax ramifications.
- Medical expenses leading up to death may be deductible, even if the funeral is not. If you itemize your deductions, qualified medical expenses may be allowed. Be sure and keep good records of all medical records in the days, weeks, or months leading up to death.
- Pre-paid funerals sidestep many of the more complicated questions of death and taxes. Although pre-planning a funeral and paying in advance won’t be any more tax deductible than paying for a funeral after the fact, it makes sense from a financial planning standpoint. Money you put into savings or invest is going to be taxed annually, just as any income is. Paying for a funeral ahead of time means that your money is still being saved for a future need, but because it has already been spent, you don’t have to pay taxes on it.
Although funeral expenses aren’t tax deductible in the traditional sense, there are ways to avoid the heavy burden of funeral costs. Plan ahead, consider options in green burial or cremation, and ask for funeral payment plans from the funeral home of your choice.