Taxes after a death: the final return, the estate’s return, and what you actually owe.

Tax after a death is confusing mostly because three different returns share one vocabulary. Separate them and the job gets smaller.

1. The final Form 1040.The person’s own income tax return, for the part of the year they were alive. Almost every family files this one.
2. Form 1041.The estate’s income tax return, for money the estate earns after the death while it is being settled. Only needed if that income reaches $600 in a year.
3. Form 706. The federal estate tax return, on the value of everything the person owned. Only required above $15 million (2026). Married couples sometimes file it anyway, for a reason covered below.

None of this needs to happen in the first weeks. If the person died before filing last year’s return, that return is still due on its normal date; otherwise the first deadline is April 15 of the year after the death. If you are still in the first days, the walkthrough and the death certificates page come first — you will need a certified copy for the IRS too.

Who files it

The personal representative— the executor, the administrator, or, in the IRS’s words, “anyone who is in charge of the decedent’s property.” If no one has been appointed by the due date, a surviving spouse can file the joint return alone.

What goes on it

All income up to the date of death: wages, pension, Social Security, interest, dividends. Income that arrives after the death belongs to the estate (next section), not to this return. The filing rules are the same as for a living person — gross income, age and filing status decide whether a return is required at all. For 2025 the standard deduction is $15,750 (single) and $31,500 (married filing jointly), with an extra $1,600 for a person 65 or older ($2,000 if single). A person with less income than that may not need a final return. If tax was withheld, file anyway to get it back.

How to mark it

Write “DECEASED”, the person’s name and the date of death across the top of the return. Use the normal Form 1040; there is no special form. The personal representative signs, and on a joint return the surviving spouse signs too. If no personal representative has been appointed, the surviving spouse signs the joint return alone and writes “filing as surviving spouse” in the signature area.

If you are the surviving spouse

You can file a joint return for the year of death. For the two years after that you may qualify as a Qualifying Surviving Spouse, which keeps the joint-return tax rates, if you were entitled to file jointly in the year of death, you have not remarried, you have a dependent child or stepchild living with you, and you pay more than half the cost of keeping up the home.

If a refund is due

Attach Form 1310(Statement of Person Claiming Refund Due a Deceased Taxpayer) — unless you are the surviving spouse filing a joint return, or a court-appointed personal representative who attaches the court certificate. Those two cases skip it.

Two forms that make the IRS easier to deal with

• Form 56notifies the IRS that you have taken on the person’s tax rights and duties as their fiduciary.
• Form 4810 asks the IRS to shorten the time it has to question the returns from the usual three years to 18 months. Useful when you want to close the estate without waiting for an audit window to expire. It does not cover the estate tax return.

After a death, the estate is a separate taxpayer. Interest on the bank accounts, rent from a house that has not been sold yet, a gain on stock the executor sells — that is the estate’s income, not the dead person’s and not yet the heirs’. It is reported on Form 1041.

When it is required

When the estate has gross income of $600 or more in its tax year, or when any beneficiary is a nonresident alien. An estate that is distributed quickly, or that holds only a checking account, often never reaches $600 and never files.

The order of work

1. Get an EIN for the estate. The IRS says this is the first thing to do. Free; apply online, or by fax or mail with Form SS-4. Banks will ask for it to open an estate account.
2. Pick the estate’s tax year.Calendar year or a fiscal year — the personal representative chooses on the first return.
3. File by the 15th day of the fourth monthafter the estate’s year ends. For a calendar-year estate, that is April 15.

Who pays the tax

Income the estate distributes to the heirs is deducted on Form 1041 and reported by the heirs on a Schedule K-1; income the estate keepsis taxed to the estate. Estate brackets are compressed: for 2026, 10% up to $3,300, then 24%, 35%, and 37% on everything over $16,000. Distributing income rather than holding it often saves tax. In the estate’s final year, unused losses and excess deductions pass through to the heirs.

The federal estate tax is a tax on the total value of what a person owned at death. For deaths in 2026 the first $15,000,000 per person is exempt (it was $13,990,000 in 2025; the One Big Beautiful Bill Act set the new figure, indexed for inflation from 2027). Above that, the top rate is 40%. The return is Form 706, due nine months after the death, with a six-month extension available on Form 4768.

Almost no one owes it. The reason married families should still know the form exists is portability.

Portability: file Form 706 even when no tax is due

A married person who dies leaves an unused exemption. The surviving spouse can add it to their own — but only if a Form 706 is filed for the first death to make the election. For a couple whose home, business and retirement accounts could grow past $15 million over a long widowhood, that filing can matter a great deal later. If the deadline was missed, the IRS allows a simplified late election on or before the fifth anniversary of the death (Rev. Proc. 2022-32).

Gifts made during life count too: in 2026 the first $19,000 given to any one person in a year is excluded; larger gifts use up part of the exemption and are reported on Form 709.

When you sell something, you pay capital gains tax on the sale price minus your “basis” — usually what was paid for it. Under Internal Revenue Code section 1014, inherited property takes a new basis equal to its fair market value on the date of death. The gain that built up during the person’s life is never taxed.

A worked example. A house bought for $120,000 is worth $400,000 when the owner dies. The heir’s basis is $400,000. If the heir sells it for $410,000 a few months later, the taxable gain is $10,000, not $290,000. The same applies to stock, land and most other property.

• Alternate valuation date.The executor can instead value everything as of six months after the death — but only if that lowers both the estate’s value and its estate tax, which means only estates that owe estate tax use it.
• Community property states. When one spouse dies, both halves of community property get the new basis, not just the half that belonged to the person who died.
• No step-up for retirement accounts.A traditional IRA, 401(k), unpaid wages, or anything else the person was never taxed on (“income in respect of a decedent”) keeps its character. Withdrawals are taxed to the heir as ordinary income.

For owners who died after 2019, most people who inherit a retirement account must empty it within ten years of the death, paying income tax on each withdrawal. Under the IRS’s 2024 final regulations, if the owner died on or after the date their own required minimum distributions had to begin, the heir must also take annual withdrawals in years one through nine and empty the account by the end of year ten. That annual requirement applies from 2025 onward.

The exceptions, called eligible designated beneficiaries, can stretch withdrawals over their own life expectancy: a surviving spouse, the owner’s minor child (until age 21), a disabled or chronically ill person, or anyone not more than ten years younger than the owner. A surviving spouse who is the sole beneficiary can also treat the IRA as their own.

Spreading the withdrawals across the ten years, rather than taking it all in one year, usually keeps the heir in a lower bracket. This is the one place on this page where a conversation with a tax professional pays for itself.

Two different taxes. An estate tax is paid by the estate before anything is distributed, above a state threshold. An inheritance tax is paid by the person who receives the money, at a rate that depends on how closely related they were. Most states have neither.

States with an estate tax (deaths in 2026)

Thresholds are set by each state and several change every January; the figures above are from each state’s revenue department as of October 2026. New Jersey has no estate tax for deaths after 2017 but keeps its inheritance tax.

States with an inheritance tax

• Kentucky. Spouse, parents, children, grandchildren and siblings are exempt. More distant relatives pay 4% to 16%; non-relatives 6% to 16%.
• Maryland. Has both taxes. The inheritance tax is collected by the Register of Wills, and any inheritance tax paid is subtracted from the Maryland estate tax.
• Nebraska.Collected by the county, with rates and exemptions that depend on the heir’s relationship to the person who died. Confirm the current figures with the county court.
• New Jersey. Spouse, children, grandchildren and parents are exempt. Siblings and in-laws pay 11% to 16% after a $25,000 exemption; everyone else 15% to 16%.
• Pennsylvania. 0% to a spouse, 4.5% to children and other direct descendants, 12% to siblings, 15% to everyone else.

Iowa’s inheritance tax ended for deaths on or after January 1, 2025.

A final Form 1040 for a person with wages, Social Security and a bank account is an ordinary return. Two IRS programs prepare it free: VITA, for households generally earning about $70,244 or less, and TCE, for people 60 and older. The Taxpayer Advocate Service (1-877-777-4778) helps when the IRS itself is the problem — a refund stuck for months, letters still addressed to the deceased.

Hire a CPA or enrolled agent when any of these is true: the estate earns enough to need Form 1041; there is an inherited IRA worth more than a year of the heir’s income; the estate is near a state threshold or the federal $15 million; a business or rental property is involved; or the person had not filed for several years. Ask for someone who prepares Form 1041 regularly — many preparers do not.

Social Security benefits the person received before the death go on the final return. Whether they are taxed depends on the other income on the return: above a base amount of $25,000 (single) or $32,000 (married filing jointly), up to 50% of the benefits are taxable, and in some cases up to 85%.