Burial insurance involves paying premiums for the remaining years of life and then a death benefit will be given to designated beneficiaries. This option helps reduce the financial burden and pay for potential final expenses, like funeral or burial arrangements.
To understand if burial insurance is tax-deductible, it’s important to understand what being tax-deductible means. Also, if burial insurance is tax-deductible, you should know what can be deducted and how.
What Does It Mean If Something Is Tax-Deductible?
If something is tax-deductible, it’s usually an expense that can be subtracted from a person’s income on their taxes but cannot be certain personal expenses. There are specific things that the federal and state governments allow to be tax deducted, which may also depend on a person’s circumstances. Deducting items from an income can reduce the amount of money that is reflected; therefore, the amount of taxes the person owes will be less.
Can Burial Insurance Be Deducted?
Burial insurance is an expense that cannot be deducted on individual tax returns come tax time. This is the case for any sort of funeral expenses under normal circumstances; however, if the expenses were paid through the estate, a person may be able to deduct these under this scenario. This allows executors of the estate to lessen the amount of the estate’s income when filing taxes for it.
Depending on the circumstances and the number of other deductions that are included, the total net value of the estate could fall under the predetermined exception limit and ultimately not be liable for the taxes. The threshold an estate must reach to be subject to taxes is upwards of millions of dollars — so most Americans will most likely not have an estate that requires some sort of tax. If money from the estate is given to loved ones, these amounts could be taxed as well, depending on the state the person lives.
Burial insurance is a type of whole life insurance that’s available to most people that are interested. It requires the policyholder to pay premiums for the rest of their life, and offers a death benefit after they pass away.
- Unfortunately, expenses relating to funerals are considered personal expenses and are not able to be deducted when filing individual tax returns.
- On the other hand, executors could deduct certain expenses under the estate if its funds were used to cover burial and funeral costs.
- If the total value of the estate is less than the state and federal thresholds, it will be exempt from taxes — so deducting as much as possible, especially for those near the threshold, would fiscally benefit the executor and estate.
If you have questions about insurance options relating to tax deductions and death benefits, give us a call at 800-548-3249. We work with the top-rated life insurance companies in Florida. And we can help you choose the right burial insurance coverage for your needs. Contact us to see if you qualify!