Are Funeral Costs Tax Deductible?

Losing a loved one is already a difficult experience, and with the average cost of a traditional funeral around $9,000 or more, the emotions of a loss may be mixed with the stress of affording the funeral. If you've lost someone recently, you may be looking for ways to help with those expenses. One avenue you might be exploring is whether funeral costs are deductible from your taxes.

The answer is different according to whether you're asking about personal taxes or the taxes for the person's estate. Here's what you need to know about funeral costs, taxes, and the Internal Revenue Service (IRS).

Can Individuals Deduct Funeral Costs?

In the case of individuals, funeral expenses are not tax deductible, according to the IRS. It's also not possible to claim funeral expenses on the final tax return of a loved one. Funeral costs are considered a personal expense. Because of this, it's very important for families and estate executors to realize that funeral expenses will have to be paid out of pocket, or by the estate.

What about medical bills?

Medical bills for preventing or treating a medical condition are indeed tax deductible. Some qualified medical bills include doctor's bills, hospital bills, prescription medications, lab work, equipment, and medical supplies.

If you're looking at using medical bills as deductions, take into account whether they amount to more than your standard deduction (the amount of your income that is not taxable), as you can't take both your standard deduction and other deductions. If your itemized deductions are more than the standard deduction, you will want to use Form 1040, Schedule A, to file the medical expenses.

Can an Estate Deduct Funeral Costs?

While funeral costs are not tax deductible for individuals, they might be for estates. Estates are the assets and wealth that a person leaves behind, whether in the form of cash or objects like houses and cars. However, there are several factors that affect the estate's ability to use deductions:

Filing threshold

Whether an estate uses funeral deductions depends entirely on whether the estate assets meet the filing threshold. In other words, the amount of assets required to even need to pay estate taxes. The 2024 filing threshold was $13,610,000. So, if the person's estate assets are less than this amount, they are not required to have a tax return filed. Several states and Washington, D.C., also require estate taxes, and each has its own threshold, ranging from $1 million to $13.6 million. If the estate is not required to file estate taxes, then there can be no funeral deductions.

Payer

The estate can only deduct the funeral expenses if they were paid for by the estate itself. If someone else paid the bill, then they cannot be deducted by the estate.

Burial benefits

If the estate received money from elsewhere for funeral expenses, such as burial benefits from the Social Security Administration or the Department of Veterans Affairs, then that amount must be subtracted from the total amount that the estate will claim for funeral costs.

Which Funeral Expenses Can Be Deducted?

When claiming deductions for an estate, the funeral expenses must be for what is considered reasonable and necessary. Some expenses that are deductible may include:

• An urn or casket
• Burial costs
• Embalming or cremation costs
• Grave markers
• Fees for funeral home services
• The funeral director and religious officiant's service fees
• Transportation to the grave site
• Catering and floral services
• Costs for memorial services

On the other hand, transportation, such as airline tickets for family members to travel to the funeral, is not deductible. It's best to verify that all the expenses you include are allowed before filing the estate's taxes.

Forms for Filing Funeral Deductions

If the estate's assets meet the threshold to file taxes, two forms will be required in order to deduct funeral expenses: Form 706 and Schedule J.

The Taxable Estate (Form 706) has the correct forms to calculate not only how much the estate is worth for tax purposes, but also for many deductions, including funeral expenses. For funeral expenses, complete Schedule J, which is attached to Form 706. List each funeral expense and write the total under "Total funeral expenses."

It's very important to keep accurate records and receipts of all bills so you can accurately fill out the forms.

Other Ways to Save on Funeral Expenses

There are several ways you may help lower the cost of funerals.

Preplan the funeral

Although this won't help if the person has already passed away, it's a good option for the future. As with most things, funeral costs do go up with time. Planning and paying for your funeral now can save money in the long run. It also saves your loved ones from a difficult and sudden financial burden.

Purchase funeral insurance policies

Again, this is a helpful tip for planning ahead. Funeral insurance policies pay for funeral expenses and end-of-life costs, and they may be easy to obtain even if you have a history of medical conditions. Be sure to compare prices of burial policies to ensure you find the policy that is most appropriate for you.

Explore more affordable funeral options

There are more options for having an affordable funeral than ever before. These include opting for cremation, choosing a green burial, and holding smaller funerals and memorial services.

Disaster funds

If your loved one passed away due to a natural disaster (like a hurricane or a pandemic), the Federal Emergency Management Agency (FEMA) may be able to help with tax-free funeral assistance.

The Neptune Society is the nation's oldest and largest provider of affordable cremation services. Whether you have an immediate need or want to plan cremation services in advance, we are always available to assist you and your family. Call 1-800-NEPTUNE (800-637-8863) today or contact us online to learn more.