Deceased Taxpayer: What You Need to Know
When a loved one passes away, dealing with their taxes is often the last thing on your mind. However, it’s important to understand what needs to be done to ensure that their tax affairs are properly taken care of.
Filing a Final Tax Return
The executor or administrator of the deceased’s estate must file a final tax return for the deceased individual. This return covers the period from January 1st of the year of death up to the date of death. If the deceased was married, the final tax return should include their spouse’s name and Social Security number.
Paying Taxes Owed
If the deceased owed taxes, these taxes must be paid by the estate before any assets are distributed to heirs or beneficiaries. If the estate does not have enough funds to pay the taxes owed, the executor or administrator may need to sell assets or take out a loan to cover the tax bill.
In addition to income taxes, there may be estate taxes owed on the deceased’s estate. The estate tax applies to estates valued at over $11.7 million for tax year 2021. However, some states have their own estate tax laws with lower thresholds.
Beneficiaries’ Tax Obligations
If you are a beneficiary of the deceased’s estate, you may be responsible for paying taxes on any income you receive from the estate. This includes income from rental properties, investment accounts, and other assets.
Dealing with a loved one’s taxes after they pass away can be a complicated and emotional process. However, it’s important to understand what needs to be done to ensure that their tax affairs are properly taken care of. Be sure to consult with a tax professional to help navigate the process.