What expenses are deductible on an estate tax return?

Outstanding debts left by the deceased. One of your responsibilities as executor of an estate is to file the deceased person's final tax return. Filing an estate tax return (a trust return) can be complicated if you're dealing with a large or complex estate. That means that the estate must reimburse anyone who helped cover the cost of funeral expenses before those funds can be deducted.

If you serve as executor or administrator of an estate, you may be wondering how estate finance works. So, what can you deduct on a wealth tax return? Are inheritance fees tax-deductible? Are funeral expenses tax-deductible? Each state sets its own wealth tax exemption amount and many states have no wealth tax. The estate may also deduct the fees of the executor who paid you for the services you provided as a personal representative of the estate. If you have to pay the funeral home in advance because estate funds are not yet available, the estate must be repaid.

An inheritance can deduct funeral and burial expenses, such as the cost of moving the body, the cost of the headstone and burial ground, and the cost of a memorial service. Just like on a regular tax return, you can also list the credits or deductions for which you would have been eligible. Even if the sale didn't generate a profit (income), the IRS will want to review it to determine if the sale generated taxable income. In the case of an inherited property, any proceeds from the sale are considered inheritance and do not count as taxable income for the estate.

You'll need to reapply for any tax year in which the estate remains open, as long as the estate generates the income limit.

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