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Determine Final Tax Responsibilities
Taxes & Financial Filings
Depending on the timing of death, you may need to file the prior year's taxes and a final return for the current year. An estate tax return may also be required if the estate is large. Consult with a CPA or attorney. Key forms: IRS Form 1040 (final individual return), Form 706 (estate tax return if applicable — federal threshold is $13.61M but state thresholds vary), and an EIN may be needed for estate transactions.
Frequently Asked Questions
Process
What is the final personal income tax return?
The final Form 1040 covers January 1 through the date of death for the year the person died. It reports all income earned during that period and claims any applicable deductions and credits. The surviving spouse or executor files it. If the deceased was married, a joint return can be filed for the full year, which often results in a lower tax bill. The return is due April 15 of the following year (or October 15 with an extension).
Legal
When is an estate income tax return (Form 1041) required?
Form 1041 is required if the estate earns more than $600 in gross income after the date of death. This includes interest, dividends, rental income, or gains from selling assets during estate administration. The estate needs its own EIN (Employer Identification Number), which you can obtain instantly at irs.gov. Form 1041 is due on April 15 of the year following the estate's tax year, but the estate can choose a fiscal year ending in any month within 12 months of death.
Do I need to file a federal estate tax return (Form 706)?
Form 706 is only required if the gross estate exceeds the federal exemption amount—$13.61 million for deaths in 2024 (adjusted annually for inflation). However, this threshold is scheduled to drop to approximately $7 million in 2026 unless Congress acts. Married couples can use "portability" to combine their exemptions, but the surviving spouse must file Form 706 to elect this, even if no tax is owed. Form 706 is due 9 months after death, with a 6-month extension available.
Costs
What about state estate or inheritance taxes?
Twelve states plus Washington DC impose their own estate taxes, often with much lower thresholds than the federal exemption. For example, Oregon's threshold is $1 million, Massachusetts is $2 million, and New York is $6.94 million. Six states impose inheritance taxes (Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania), which tax the beneficiary based on their relationship to the deceased. Maryland is the only state with both. Check your state's current thresholds with a CPA.