Paying for a funeral can be a major expense for families. In times of grief, managing finances and figuring out what is tax deductible can add extra stress. This article will examine if and when funeral home expenses can be claimed as tax deductions.
Funeral Expenses Are Considered Itemized Deductions
Funeral expenses are considered itemized deductions on both federal and state income tax returns. This means you can only deduct funeral costs if you choose to itemize your deductions rather than taking the standard deduction.
For the 2022 tax year, the standard deduction is $12,950 for single filers and $25,900 for married couples filing jointly. So unless your total itemized deductions, including funeral costs, medical expenses, mortgage interest, etc. exceed the standard deduction amount, you will not benefit from itemizing funeral expenses.
Deductible Funeral Costs For Taxes
If you do itemize, what exactly can you deduct? The main expenses that can be deducted include:
- Funeral home costs for viewing, ceremony, cremation or burial
- Casket, urn, burial plot, headstone, markers
- Flowers
- Transportation costs like hearse rental or fuel for family vehicles
- Printed materials like obituary notices, programs, or thank you cards
- Clergy honorariums
- Food and beverages for funeral reception
- Clothing purchased specifically for the funeral
Keep in mind that not all funeral-related costs are deductible. Life insurance payouts, inheritance, or grief counseling are not deductible.
Are Prepaid Funeral Costs Tax Deductible?
No, prepaid funeral costs are not tax deductible until the year the funeral services actually occur. Prepaying funeral costs, such as pre-purchasing a burial plot, casket, cremation urn, etc. is not deductible in the year you make the payment.
Those prepaid expenses can only be deducted in the year they are actually used for the funeral services. For example, if you prepay for a casket in 2022 but the person doesn’t pass away until 2030, you can only deduct the casket cost on your 2030 tax return.
The IRS does not allow deducting prepaid funeral expenses in advance of someone’s death. You have to wait until the tax year when the funeral takes place to include those costs as part of your total itemized funeral expense deduction.
The only funeral costs you can deduct are those paid in the same tax year as the funeral services. Prepaid funeral plans and insurance can provide peace of mind but do not offer an advanced tax deduction.
The key thing to remember is that prepaying or preplanning funeral expenses is not the same as deducting them. You cannot deduct them until the year the funeral occurs.
Funeral Deductions Only Allowed in Year Paid
Funeral expenses are deductible in the same year they are paid, regardless of when the services occurred. So if you make a payment in 2023 for a 2022 funeral, that payment is deductible in tax year 2023.
You cannot deduct future funeral or burial costs in advance. Prepaid funeral plans are not deductible until the year of the individual’s death.
How to Claim Your Funeral Deductions
To claim the deduction, save itemized invoices and receipts from the funeral home and other vendors. The funeral home should provide an itemized statement.
Report funeral expenses on IRS Form 1040 Schedule A. You can claim expenses for the funeral of a spouse or dependent.
There is no dollar limit on the amount deductible, but total itemized deductions must exceed the standard deduction threshold.
State Funeral Deductions
Most states follow federal guidelines and also let taxpayers deduct funeral costs as itemized deductions on state returns. However, some states prohibit deducting funeral expenses or have different policies, so check your own state’s rules.
Consult a Tax Professional For Your Funeral Costs
Determining optimal tax deductions involves looking at your entire financial situation. It’s a good idea to consult a tax preparer or accountant when dealing with funeral deductions. An expert can help maximize your deductions and ensure proper filing.
Summary
Funeral home expenses and related costs are deductible as itemized expenses on federal and most state tax returns. To claim the deduction, you must itemize rather than taking the standard deduction. Save documentation such as receipts and funeral home statements.
Report funeral expenses on Schedule A when filing your tax return for the year you paid the costs. Consult a tax preparer if you need help maximizing deductions. Most importantly, give yourself grace as you grieve during this difficult time.
Losing a loved one is incredibly hard. Claiming deductions likely provides little comfort. But a small financial benefit can relieve some stress. Focus most energy on healing. Find grief support through counselors, faith communities, nonprofits and family. Prioritize self-care and be gentle with yourself.