Probate fees are not deductible on an individual’s personal income tax return (Form 1040), but they are generally deductible on the estate’s income tax return (Form 1041) or the federal estate tax return (Form 706). These deductible expenses include court filing fees, executor fees, attorney fees, and appraisal fees incurred for estate administration.
If you incurred expenses managing the estate, you can deduct those on the estate's tax return. These might include costs like attorney or accountant fees or the cost to use a service. The estate can also deduct any executor fees it paid you for the services you provided as personal representative of the estate.
The probate application fee can be paid online or via cheque (if applying by post) and then reimbursed from the estate later. Similarly, if a professional is undertaking the work on behalf of the Executor or Administrator, the cost of this service can be claimed back from the estate.
These may include your funeral expenses, debts you owe at your death, and expenses required to administer your estate. The good news is that these expenses are deductible on your es- tate tax return, which in turn, can produce estate tax savings for your family.
Claim for non-funeral estate expenses
Prior to settlement, we can release money from the deceased estate to pay for other costs like unpaid bills or expenses relating to the estate (strata fees, council rates, electricity, gas, water, home, contents and car insurance).
Although each situation is unique and tax requirements may vary, individuals can't file costs associated with the probate. Instead, the estate is responsible for these probate-related expenses.
How to reduce probate fees
Many business expenses are 100% deductible, including advertising, employee wages, rent, supplies, and certain business meals like company parties or meals for the public, while personal deductions like student loan interest or charitable donations (depending on the type) can also be fully deductible for individuals. The key is that the expense must be "ordinary and necessary" for your trade or business or meet specific IRS criteria, often differentiating from the 50% rule for client meals.
Legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax are miscellaneous itemized deductions and are no longer deductible.
Depending on the situation, about 40 to 60 percent of legal fees for estate planning are tax-deductible. Regardless of the amount, it is important to know that there are some exceptions to this rule.
The "$1000 instant tax deduction" refers to a proposed Australian tax policy, specifically from the Albanese Labor government in 2025, allowing eligible workers to claim a flat $1,000 deduction for work-related expenses without needing receipts, simplifying tax returns for those with lower expenses but potentially costing those with higher expenses, starting from 1 July 2026. It's an option to replace itemised work-related deductions, not an extra refund, and doesn't affect non-work-related deductions like charity.
The three year rule affects certain gifts and transfers made within three years of death. Here's a straightforward breakdown: If you transfer certain assets or give up control over them within three years of your death, those assets might be included in your estate for tax purposes.
Here are the most common drawbacks:
In general, administration expenses deductible in figuring the estate tax include:
Common Estate Planning Mistakes We See
At our firm, we frequently encounter these errors that can put families at risk: Not filing Form 706 because the estate falls below the exemption threshold. Incomplete or inaccurate asset valuations that trigger IRS audits.
You can typically inherit a large amount without federal taxes because the tax applies to the deceased's estate, not the recipient, and the exemption is very high: $13.99 million in 2025 and $15 million in 2026 per person, meaning most inheritances fall below this threshold. The key is that the estate's total value must exceed these limits for any tax to be owed by the estate. Inheritances themselves (cash, property) are generally not income, but earnings on them (like interest/dividends) or pre-tax retirement funds (like IRAs) are taxable.
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
Under the 3½-month rule, a taxpayer may treat economic performance as occurring with respect to a service liability when payment is made, as long as the taxpayer reasonably expects the person providing the services to provide them within 3½ months after the taxpayer makes the payment.
A 90-Day Letter is an IRS notice issued after an audit that highlights discrepancies in taxes. Taxpayers have 90 days to respond, or 150 days if they are abroad, to dispute the IRS claims. If you agree with the IRS findings, you must sign and submit Form 5564 to avoid penalties.