Download our free probate checklist. Download now

What estate expenses are tax deductible?

Settling an estate can get expensive pretty quickly. Here’s what you need to know about tax-deductible estate expenses.

Estate tax deductible expenses

Settling an estate involves several fees and expenses: From probate filing fees to estate taxes, legal fees, and funeral expenses, things can quickly add up during the estate settlement process.

However, the good news for estate executors is that the majority of these expenses are paid for by the estate, and several of these expenses are even tax-deductible. However, some of these deductions are on a case-by-case basis, and if you’re facing a particularly complex estate it can be helpful to enlist the aid of an experienced partner.

There are also cases where it’s easier for an estate executor to pay certain expenses out of their pocket, and then get reimbursed by the estate later.

This is particularly relevant if there are certain debts or fees that need to be made immediately but the executor has not yet received letters of testamentary from the court.

And then there are those personal expenses that an executor may incur during the probate process. This can include money for transportation, including public transport fees, gas, and airplane tickets if the deceased lived far away from the executor or if the executor had to travel for probate purposes.

Regardless of whether expenses are paid immediately by the estate, paid upfront by the executor and reimbursed, or whether the executor incurred personal expenses, there are certain types of expenses that can usually be deducted for income tax purposes, provided that they have not already been deducted on the estate’s income tax return. As a reminder: The executor has to submit an estate income tax return if the estate generates income through assets such as investments. Still with us?

Then let’s dive in; Here are the general expenses that can be deducted:

Fees paid for estate administration purposes

Many things can fall under this category, including transportation expenses that the executor incurred during the probate process (as long as those expenses are within reason), and the commission that executors are entitled to receive, which is usually a percentage of the estate and paid out of the estate (in which case it would be listed as a deductible expense on the estate tax return).

Attorney, accountant, and return preparer fees

If an executor does choose to enlist the services of professionals such as attorneys and accountants, then these fees can be deductible expenses on the estate tax return, since these fees are usually paid for by the estate. Just keep in mind that attorney fees can add up quickly, so make sure you’re roping in an attorney only when absolutely necessary: For example, when there’s a dispute regarding the estate or if the will is very unclear.

Part of an executor’s job is to submit a final income tax return for the deceased, as well as any previous tax returns they had not submitted, as well as an estate tax return if the estate has been generating income. In some states, there’s also an estate tax for particularly large estates. If an estate’s tax situation becomes too complicated, it may be beneficial to hire an accountant.

Management, conservation, and maintenance expenses

It’s an executor’s responsibility to ensure that the assets belonging to the estate are well-cared for and maintained during the probate process. This particularly applies to any real estate that the deceased may have owned. In order to maintain and manage property during probate, an executor will have to pay expenses such as property taxes, homeowners insurance, cleaning, maintenance, and repair costs.

In case the property needs to be sold, the executor must also take care of the closing costs of the sale. This also goes for vehicles that the deceased may have owned, such as cars, motorcycles, and boats.

Depending on whether the executor or the estate covered these costs, they can be deducted on the corresponding tax return.

Administration and tax expenses

This covers all those other expenses that can add up over time while settling an estate, and usually revolve around the fees associated with courts and financial institutions. These can include:

  • Appraisal fees if an executor paid for the value of certain property to be appraised.
  • Investment management fees for securities belonging to the estate that are still being managed during probate.
  • Probate/court filing fees. These are typically considered to be estate expenses.
  • Ordering documents, such as death certificates, and getting them notarized and sent via post.
  • Paying required taxes.
  • Funeral costs and memorial costs. A note about these expenses: They can only be deducted if they were paid for by the estate. If a family member or an external organization paid for the costs, they cannot be deducted.

Every estate is unique, and so is its tax situation. If you’re an estate executor and feeling uncertain about what expenses you can deduct and on which tax return you should claim it, you don’t need to do it alone.

Our experienced team of professionals can help guide you through these obstacles and give you the tools you need to navigate the estate settlement process. Reach out for a free consultation and find out how we can help.

Probate Checklist Join the 10,000+ executors who have downloaded our blueprint to probate

Use our 12-step blueprint to probate, avoid settlement delays, and settle estates sooner.

Download yours for free!