According to the National Funeral Directors Association (NFDA), the average cost of a funeral in 2016 was $7.360. The amount can represent an impact in the family savings if they are not prepared. A survey from NFDA also shows that 19 percent of Americans above 40-years-old have burial plans.
Having a pre-need funeral plan covers the essential demands for that moment: prepare and transport the body, the cost of a coffin and sometimes bureaucratic matters. Although it can be useful, people planning to ask for a pre-need insurance or funeral expense tax deduction may be disappointed.
Burial Plans, Expenses and Taxes
In general, the IRS doesn’t allow the funeral expense tax deduction. Although it’s possible to deduct medical expenses, that should be used to treat or prevent medical illness, and the definition doesn’t apply to funeral costs or pre-need insurance.
The general rule is that there isn’t any funeral expense tax deduction. It applies to pre-need funeral plans or general expenses you may have if paying for the ceremony. There are also no tax deductions for a cemetery plot if you paid it on your own.
Funeral Paid by Estates
Although burial plans and funeral costs, in general, are not tax-deductible, there is an exception. If the estate pays the costs for the funeral and the person who passed away had money for covering the final expenses, the estate can deduct the expenses from its tax return.
When the person’s estate has a gross value above $5 million, the person responsible has to file a law tax return. The executor can file expenses such as a casket, vault, cremation, church fees and food served at the reception. In this case, it is also possible to get a tax deduction for a cemetery plot, as long as the estate paid for it.
Paying for Someone’s Funeral Expenses
Relatives of friends who cover the expenses of a person’s funeral can’t file it in their tax returns. There is also no tax deduction for a cemetery plot or burial plans paid for by someone else. For that reason, many people prefer to let the estate pay the expenses, so it’s possible to claim on the tax return.
Filing for Tax Year 2017 and 2018
If you are allowed to report funeral expenses, the Form 706 allows the executor to claim funeral expenses. The person should complete Schedule J, Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims, attached on Form 706. In this file, the person should describe each item of the funeral expenses on Line 1 of Section A. Under the description, the person should add the total amount.
- NFDA: Statistics
- Smart Asset: How Much DoesThe Avarage Funeral Cost
- Top Tax Defenders: Are Funeral Expenses Tax Deductible?
- IRS: Publication 501 (2017), Exemptions, Standard Deduction, and Filing Information
- 26 CFR § 20.2053-2 - Deduction for funeral expenses. | CFR | US Law | LII / Legal Information Institute
Luana Ferreira has a bachelor in journalism since 2010. She started her career on television in Brazil, working as a producer for newscasts, but soon moved to print and online publications. She works as a freelance writer since 2012 and has written about finances, business and entrepreneurship for prestigious publications like BBC, Entrepreneur, Playboy and Sapling.