Funeral expenses tax deductions

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Funeral expenses tax deductions
Burial and funeral expenses can be legitimate deductions. (Jupiterimages/Photos.com/Getty Images)

Many taxpayers misunderstand tax rules related to financial transactions, and the IRS will enforce any tax deduction that is wrongly applied on a tax return. One of the most misunderstood areas is burial or funeral expenses, including the cost of a cemetery lot. These are legitimate deductions, if the deductions are applied correctly.

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Miscellaneous Deduction

A common IRS tax deduction is the miscellaneous expenses deduction, which can include job-hunting expenses and tax-preparation expenses. This is not the appropriate area to deduct any death-related expenses.

Medical Expenses

A deduction for death expenses should not be applied to medical expenses, which is a bill related to services that are not paid by insurance, Medicare or Medicaid. Medical expenses can include payments for the diagnosis, treatment or prevention of disease, according to the IRS.

Estate Tax Deductions

Funeral expenses are found under the estate tax deduction. According to the IRS, an estate owes an estate tax if the value of the assets, property, retirement, stocks, bonds and life insurance payout after allowable deductions is more than £2.3 million in 2009.

Allowable Expense

Deductions can include the following list of expenses: funeral costs; casket costs; and last illness expenses, including physician, nursing home and hospital bills, outstanding bills, as in credit cards, and administration costs. Administration costs include attorney fees and court costs to open an estate in probate court.

Spouses and Children

If the entire estate is left to a living spouse, the estate tax rules change, and the estate tax value is set at £0 per the IRS. If there are children and the estate is left to them, the estate tax is still required to be paid.

Required Details

Funerals often cost between £1,950 and £6,500. It is important to keep track of all the costs for the funeral and any last expenses, including unpaid bills, such as a mortgage, to deduct from the value of the estate. This can help lower the total amount of the assets that are taxed by IRS.

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