Funeral Costs Can Be Deducted from Estate Taxes

Only estates worth more than the federal estate tax exemption are required to file a federal estate tax returns. For this reason, most can’t claim estate tax deductions. Estates that are subject to the federal estate tax, however, can use various deductions, including funeral expenses, to reduce the estate’s overall taxable income.

Funeral expenses are one example of an exemption, though there are certain rules governing how these costs can be deducted. Here’s what you should know.

Deducting funeral costs

Estate tax deductions can be used for funeral expenses such as purchasing a burial lot, maintenance of that lot, funeral services or masses, cremation, caskets, hearse rental, floral costs, transportation of the body, and gravestones or markers.

There are some limits to what can be deducted, though. For example, most of the time, travel expenses for family members to get to the funeral cannot be deducted as funeral expenses, as they are personal expenses for the people attending.

In addition, there are stipulations that funeral expenses to be exempt must be “reasonable and necessary.” This is a vague standard, and can vary depending on the size of the estate and who the decedent is. What’s “reasonable and necessary” for an extremely wealthy and connected individual might not be the same as what’s “reasonable and necessary” for someone with much less wealth and notoriety.

The federal estate tax will limit funeral expense deductions to the extent that they are allowable under state law.

For more information about exempt expenses as part of estate planning and how funeral costs can be deducted from your estate’s value, contact a trusted Tampa, FL estate planning lawyer at BaumannKangas Estate Law.