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Death Expenses as Tax Credits

When a taxpayer dies, the executor of his will assumes responsibility for completing certain tasks, including filing the decedent's final personal tax return. If a decedent's estate is worth more than an amount identified by the Internal Revenue Service, the IRS requires his executor to file a tax return on behalf of the estate as well. While a tax credit does not exist for a decedent's funeral expenses, the IRS allows a decedent's executor to deduct them from an estate's tax return.

  1. Filing

    • As of the date of publication, the IRS requires an executor to file an estate tax return if a deceased died in 2010 or later and the decedent's gross estate plus prior taxable gifts equals at least $5,000,000. An executor has nine months from the time of the deceased's death to file Form 706 on behalf of an estate and pay any taxes owed by the decedent's estate. An executor may request an automatic six-month extension of the IRS's deadline by filing Form 4768.

    Gross Estate

    • The value of a decedent's gross estate equals the fair market value of the property he owned at the time of his death. An executor accounts for the value of a decedent's estate by appraising the deceased's possessions, including real estate, collectibles, securities and business interests. An executor also includes the value of property a deceased transferred within three years of his death and life insurance proceeds payable to the decedent's estate in the gross value of the estate.

    Deductions

    • In order to determine the value of a decedent's taxable estate, his executor must subtract permissible deductions from the value of his gross estate. The IRS allows an executor to deduct debts a deceased owed at the time of his death, the value of property transferred to the decedent's surviving spouse and charitable donations from a deceased's gross estate, for instance. The IRS permits an executor to deduct costs related to the deceased's funeral as well.

    Recording Funeral Expenses

    • An executor itemizes a decedent's funeral expenses on Schedule J of Form 706. An executor must reduce the total of a deceased's funeral expenses by amounts reimbursed by any source, including Social Security. An executor transfers the sum of the decedent's funeral expenses as a deduction onto line 13 on page 3 of Part 5 - Recapitulation, of Form 706.

    Taxable Estate

    • A decedent's taxable estate equals his gross estate minus any deductions, including his funeral expenses. Once he calculates a decedent's taxable estate, an executor adds the value of the taxable gifts the decedent made after December 31, 1976 to the taxable estate and subtracts the permissible unified credit amount, up to $5,000,000 in 2011, depending on whether the decedent paid taxes on gifts rendered during his lifetime. The IRS levies the applicable estate tax, currently 35 percent, on the balance determined by the executor.

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