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Final Income Tax Return for Decedent—Form 1040 or 1040-SR — Deductions: Taxes After a Death (2025 IRS Guide)

This guide covers “Final Income Tax Return for Decedent—Form 1040 or 1040-SR — Deductions” within taxes after a death. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 559 (2025), Survivors, Executors, and Administrators, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

The personal representative (defined earlier) must file the final income tax return (Form 1040 or 1040-SR) of the decedent for the year of death and any returns not filed for preceding years. A surviving spouse, under certain circumstances, may have to file the returns for the decedent. See Joint Return, later.

Final Income Tax Return for Decedent—Form 1040 or 1040-SR — Deductions

Generally, the rules for deductions allowed to an individual also apply to the decedent's final income tax return. Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. See Medical Expenses, later.

Standard Deduction

If you don't itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. For information on the appropriate standard deduction, see the Form 1040 and 1040-SR instructions or Pub. 501.

Medical Expenses

Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. This includes expenses for the decedent, as well as for the decedent's spouse and dependents.

Caution:

Qualified medical expenses aren't deductible if paid with a tax-free distribution from an HSA or an Archer MSA.

Election for decedent's expenses.

Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred.

If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). You can deduct expenses incurred in the year of death on the final income tax return. You should file an amended return (Form 1040-X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired.

The amount you can deduct on the income tax return is the amount above 7.5% of AGI. Amounts not deductible because of this percentage can't be claimed on the federal estate tax return.

Making the election.

You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. The statement must state that you haven't claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents.

Example.

R. Brown used the cash method of accounting and filed their income tax return on a calendar year basis. R. Brown died on June 1, 2025, at the age of 78, after incurring $800 in medical expenses. Of that amount, $500 was incurred in 2024 and $300 was incurred in 2025. R. Brown itemized the deductions when the 2024 income tax return was filed. The personal representative of the estate paid the entire $800 liability in August 2025.

The personal representative may file an amended return (Form 1040-X) for 2024 claiming the $500 medical expense as a deduction, subject to the 7.5% limit. The $300 of expenses incurred in 2025 can be deducted on the final income tax return if deductions are itemized, subject to the 7.5% limit. The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future.

Medical expenses not paid by estate.

If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial parent and the noncustodial parent to the extent paid by that parent during the year.

Insurance reimbursements.

Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. The reimbursements are also includible in the decedent's gross estate.

Caution:

No deduction for funeral expenses can be taken on the final Form 1040 or 1040-SR of a decedent. These expenses may be deductible for estate tax purposes on Form 706.

Deduction for Losses

A decedent's NOL deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. See Pub. 536. You can't deduct any unused NOL or capital loss on the estate's income tax return.

Note:

Generally, an NOL arising in a tax year beginning in 2021 or later may not be carried back and instead must be carried forward indefinitely. However, farming losses arising in tax years beginning in 2021 or later may be carried back 2 years and carried forward indefinitely.

At-risk loss limits.

Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income.

These rules limit the deductible loss to the amount for which the individual was considered at-risk in the activity. An individual will generally be considered at-risk to the extent of the money and the adjusted basis of property that are contributed to the activity and certain borrowed amounts for use in the activity. An individual will be considered at-risk for amounts borrowed only if the individual was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. The individual isn't considered at-risk for borrowed amounts if the lender has an interest (other than as a creditor) in the activity or if the lender is related to a person (other than the taxpayer) who has an interest in the activity. For more information, see Pub. 925, Passive Activity and At-Risk Rules.

Passive activity rules.

A passive activity is any trade or business activity in which the taxpayer doesn't materially participate. To determine material participation, see Pub. 925. Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements.

Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Passive activity losses or credits not allowed in 1 tax year can be carried forward to the next year.

If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. The part of the accumulated losses equal to the excess isn't allowed as a deduction for any tax year.

Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. For more information, see Pub. 925.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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