Filing an Income Tax Return for an Estate

A deceased person's estate is a separate legal entity for federal income tax purposes. If you're the executor of someone's estate, you might need to file an income tax return for the estate, as well as a final personal income tax return for the deceased person.

Do You Need to File an Income Tax Return for the Estate?

The executor must file a federal income tax return (Form 1041) if the estate has:

• gross income for the tax year of $600 or more, or
• a beneficiary who is a nonresident alien.

What kind of income does an estate have? Common examples are rents from real estate in the estate, salary that wasn't paid to the deceased person before death, or interest on an estate bank account.

If you promptly distribute all the estate assets to the people who inherit them, the estate might not have income, and you might not need to file an income tax return for it. For example, if the deceased person owned a house in joint tenancy with his spouse, and had payable-on-death designations on his bank accounts, those assets will pass immediately to their new owners at death. They won't generate income for the estate.

Income Tax on an Estate vs. Estate Tax

This article discusses income tax on an estate—not estate tax. The terminology is confusing, but the federal gift and estate tax is a wholly different tax. It's levied on only the very largest estates—those valued at more than $13.61 million ($27.22 million for married couples) for deaths in 2024.

• Who needs to file an income tax return (Form 1041) on an estate? Estates producing income of over $600 for the tax year, or estates with beneficiaries who are nonresident aliens.
• Who needs to file an estate tax return? Estates whose assets exceed $13.61 million (for deaths in 2024).

Filing the Estate's Income Tax Return on Form 1041

The income tax return form for estates is IRS Form 1041. It's also called a "fiduciary" return, because you file it in your capacity as executor of the estate. (An executor is a fiduciary—that is, someone who's entrusted with someone else's money—and has a legal duty to act honestly and in the best interests of the estate.) The Form 1041 return is similar to the personal income tax return, Form 1040, that we all file every April 15. There's a "Decedent's estate" box at the top the form, which you should check.

The executor of the estate is responsible for filing a Form 1041 for the estate. The return is filed under the name and taxpayer identification number (TIN) of the estate. On it, you'll report estate income, gains, and losses, and will claim deductions for the estate. You don't have to include a copy of the will when you file the return.

Deadline for Filing the Estate's Income Tax Return

The estate's tax year begins on the date on which the deceased person died. You, as executor, can file the estate's first income tax return (which also could be its last) at any time up to 12 months after the death. The tax period must end on the last day of a month. If you file in any month except December, the estate has what's called a fiscal tax year instead of a calendar tax year.

What Expenses Are Deductible?

All estates get a $600 exemption. You can also deduct:

Distributions to beneficiaries. If you are required to pay out the income on estate assets to beneficiaries, you can take a deduction for those amounts. To calculate the amount of the deduction, fill out Schedule B. The income distribution deduction determines the amount of any distributions taxed to the beneficiaries.

Executor's fees. If the estate paid the executor, the amount can be deducted from the estate's income. The executor must report the fees as taxable income on their own personal income tax return.

Expert fees. You can deduct reasonable amounts the estate paid to attorneys, accountants, and tax preparers.

Expenses of administration. The amount you spend to wrap up the estate—to collect assets, pay debts, and distribute property to the people who inherit it—is deductible. You don't have to conduct a formal probate to have deductible expenses of administration. But deductible formal probate costs are likely to include probate court filing fees, the cost of publishing probate notices in the local newspaper (as required by the probate court), and the cost of buying a bond (a type of insurance policy that guards against your misuse of estate assets), if it's required.

Miscellaneous deductions. Some other expenses can be deducted if they exceed two percent of the estate's adjusted gross income. Examples are investment advice, safe deposit box rentals, office supplies, postage, and travel expenses.

You can't deduct medical or funeral expenses on Form 1041. You may be able to deduct medical expenses on the deceased person's individual income tax return.

Forms for Beneficiaries

If you distribute income to beneficiaries, they are responsible for paying income tax on it. When you file the estate's Form 1041, you must give each beneficiary a Schedule K-1 form, showing how much the beneficiary received during the tax year.

Paying the Income Tax for the Estate

The executor is responsible for making sure that the estate pays any income tax due. The tax is paid from estate assets.

Getting a Filing Extension for Form 1041

If you need more time than the allotted 12 months after death, don't panic. You can request an automatic extension of five and a half months using Form 7004.

Getting Additional Help

For more guidance on income tax returns for estates, as well as other tasks the executor of an estate must handle (such as paying the deceased person's individual income taxes), check out The Executor's Guide, by Mary Randolph (Nolo).

An executor's duties can be complicated. If you're an executor and need assistance, consider speaking with a probate attorney in your area.