Can Estate Expenses and Funeral Costs Be Deducted From Taxes?

After a death, the estate trustee (executor) pays for many things: the funeral, lawyer and accountant fees, court and probate costs. It is natural to wonder which of those lower the tax bill.

The short answer is that the main costs do not reduce the deceased person's personal tax, but other claims do. This article separates what can be claimed on the final return from what falls elsewhere, so you can keep records and ask better questions.

The rule for funeral, probate and administration costs

Funeral expenses, probate fees and fees to administer the estate cannot be deducted as personal expenses on the deceased's returns. So you should not enter the funeral invoice or the legal bill as a deduction on the final T1 return.

That does not mean the costs are ignored. They are paid from the estate, which reduces what is left for the beneficiaries. Keep the receipts, because the estate trustee may need them when accounting to the beneficiaries.

What can be claimed on the final return

The final return is the deceased person's own T1 return, and the legal representative files it. Claims that may be available there include medical expenses (lines 33099 and 33199), donations, and the Canada workers benefit on line 45300.

Medical expenses: the most useful claim

For a person who died in 2025, medical expenses paid in any 24-month period that includes the date of death can be claimed, if they were not claimed for any other year. Look back through bills from before death as well as any paid afterward.

The claim is reduced by the lesser of $2,834 or 3% of total net income reported on all returns, as stated by the CRA, and it can be split between the final and optional returns. That figure is indexed by year, so check the amount for the year of death.

Up to three optional T1 returns may be filed, and the eligible income goes on the optional return instead of the final return. They are not required, but filing them can reduce or eliminate tax. Splitting medical claims across returns is one reason to ask an accountant about them.

Ontario estate administration tax: no deductions for costs

For estate certificates applied for on or after January 1, 2020, there is no estate administration tax if the estate is $50,000 or less. Above that amount tax is payable, so confirm the exact calculation with the Ontario government or a lawyer. Funeral costs, lawyer fees, loans and credit card debts cannot be deducted from the estate value; only mortgages on real property can.

The value also leaves out jointly owned assets that pass automatically to the surviving owner and assets with a named beneficiary, such as insurance, RRSP, RRIF, TFSA or registered pension plan assets. For example, an estate of $240,000 owes $2,850.

The estate's T3 return and what to ask

The T3 return reports income the estate earns after death that has not been paid to beneficiaries. Whether and how executor fees and other administration costs can be used on the T3 is a technical question that depends on the facts, so ask the accountant who prepares the return.

A T3 is due no later than 90 days after the trust's tax year-end. A T3 may not be needed if the estate is distributed right after death or earns no income, although the final T1 is still required.

• Keep every receipt for funeral, legal, accounting and court costs.
• Do not claim funeral, probate or estate administration fees on the final return.
• Gather medical receipts from before and after the date of death. For a person who died in 2025, a 24-month period that includes the date of death can be used.
• Collect donation receipts.
• Ask your accountant how the estate's costs are treated on the T3 return.
• Confirm the value of the estate for estate administration tax, excluding assets with a beneficiary or joint ownership.

What to do next

File the final return by its due date: April 30 of the following year for deaths between January 1 and October 31, or 6 months after death for deaths between November 1 and December 31. A late return can bring a penalty of 5% of the balance owing, plus 1% for each full month late up to 12 months, plus interest.

Before the estate is distributed, the trustee must get a clearance certificate, and request it only after returns are filed and assessed and taxes are paid or secured. If the estate is large, includes a business or has disputes, a lawyer and accountant can help.

Frequently asked questions