All personal representatives must include fees paid to them from an estate in their gross income. If you aren't in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Schedule 1 (Form 1040), line 8.
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.
Fact Sheet on Being on Executor
An executor (personal representative) is the person responsible for settling a deceased person's estate. As executor, your duties include inventorying, appraising, and distributing assets, paying taxes, and settling debts owed by the deceased.
The executor is entitled to 5% of the first $200,000 of corpus; 3.5% of the excess over $200,000 up to $1,000,000; and 2% of the excess of the corpus over $1,000,000. From a practical standpoint, using my example of a $400,000 estate, my hypothetical executor would be entitled to a commission of $17,000.
An executor of a will cannot take everything unless they are the will's sole beneficiary. An executor is a fiduciary to the estate beneficiaries, not necessarily a beneficiary. Serving as an executor only entitles someone to receive an executor fee.
According to California Probate Code section 10800, the following is the statutory fee structure for personal representatives in California; 4% on the initial 100,000 dollars. 3% on the subsequent 100,000 dollars. 2% on the following 800,000 dollars.
Utilize deductions for estate-related expenses like legal and accounting fees to lower taxable income. Consider reimbursement for out-of-pocket expenses to avoid additional tax liabilities. Explore state-specific regulations and exemptions that may minimize executor fee taxes.
After someone dies, their estate (money, possessions and property) is left to an executor named in their will. The executor is legally responsible for taking care of their estate, which will likely include paying any taxes that are owed, including Capital Gains Tax.
Some states have inheritance taxes, but California is not one. However, it's essential to be aware that even though there is no inheritance tax in California, there may still be federal estate tax to consider.
You don't need to report a cash inheritance on your federal return. The IRS doesn't impose an inheritance tax. Only a handful of states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) have some kind of inheritance tax.
The administrator, executor, or beneficiary must: File a final tax return. File any past due returns. Pay any tax due.
Funeral expenses aren't tax deductible for individuals, and they're only tax exempt for some estates. Estates worth $11.58 million or more need to file federal tax returns, and only 13 states require them. For this reason, most can't claim tax deductions.
The personal representative of an estate is an executor, administrator, or anyone else in charge of the decedent's property. The personal representative is responsible for filing any final individual income tax return(s) and the estate tax return of the decedent when due.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
You need to file IRS Form 56 if you take on a fiduciary role, such as an executor, administrator, trustee, guardian, or receiver. Here are some examples: Executor of an Estate: If you are handling the tax matters of a deceased person's estate, you must file Form 56.
Real Estate and Business Taxes
Similarly, an executor is responsible for paying all business taxes if the estate contains a business. Most importantly, this will include quarterly payroll taxes.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
If you are inheriting a house that is paid off, in most cases, you will still need to go through probate. Some states may allow you to bypass probate if a quitclaim deed was executed properly. However, it is likely that you will still need to go through probate even if you are inheriting a house with no mortgage.
The fees you are paid as a personal representative, executor, or Administrator of an estate are treated as taxable income.
California has one of the most detailed schemes, which provides that the executor fee is four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent on the next $9 million, one-half of one percent on the next $15 million, and a “reasonable amount" ...
As an executor, you must provide a formal accounting at least once a year, but beneficiaries can request an informal probate accounting in California at any time. When they do, you must produce it. Because of this, maintaining thorough and accurate records of the estate's finances is crucial.
When does an executor get paid? In some states, an executor receives their compensation only after the estate's bills are paid but before the remaining assets of the estate are distributed to the heirs.
Some states use the term Personal Representative, and some states use the term Executor. In the end, both roles involve the responsible handling of the deceased's assets, debts, and final wishes, ensuring that the distribution process follows legal protocols and the desires of the departed individual.