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Can funeral expenses be deducted from the inherited estate?—What can and cannot be deducted

宮崎ひなた相続相談室

2026年8月2日 10:03

Conclusion: Yes, they can. However, there is a "line to be drawn"

"Can the money spent on a funeral be deducted when calculating inheritance tax?"

This is a question I am often asked in consultations. To conclude, yes, it can be deducted.

Strictly speaking, funeral expenses are not the deceased's debts, but because they are expenses that inevitably arise in connection with the inheritance, they are allowed to be deducted from the inherited estate (debt deduction). If funeral expenses cost 2 million yen, the taxable estate is reduced by that amount, and the inheritance tax is also reduced.

However, not every expense related to a funeral can be deducted. There is a line between "what can be deducted" and "what cannot," and getting this wrong can lead to having to redo your tax return. In this article, I will explain how to organize these expenses and provide some practical points to keep in mind.

What can be deducted: Expenses incurred for the "funeral itself"

Generally, expenses that can be deducted are those directly incurred for the "wake, funeral, and burial."

The key point is that offerings to temples (o-fuse) and fees for posthumous Buddhist names (kaimyo-ryo) can also be deducted. Although temples often do not issue receipts, these can be accepted if you keep a note of "when, to which temple, and how much you paid." Make sure to keep a record each time you make a payment.

What cannot be deducted: Expenses incurred "after the funeral" or "outside the scope of ritual"

On the other hand, the following expenses cannot be deducted.

A common mistake is the distinction between a return gift for incense money (koden-gaeshi) and a gift for funeral attendees (kaiso-onrei). The gift for funeral attendees, which is given on the day as a thank you for attending, can be deducted, whereas the return gift for incense money, which is a return for the incense money received, cannot be deducted.

Also, the reason why graves and Buddhist altars cannot be deducted is that they are "non-taxable assets," as I mentioned in a previous column. The logic is that you cannot deduct the cost of buying assets that are not subject to inheritance tax in the first place (which is why there is a point to buying a grave while you are still alive).

Note that expenses for the seventh-day memorial service (nanuka-hoyo) may also be allowed to be deducted in practice if they are held on the same day as the funeral and are billed without being separated from the funeral expenses.The breakdown of the invoiceis what matters here.

Practical basics: Always keep receipts and records

The practical steps to ensure you receive the deduction are simple.

Keep funeral home invoices and receipts in a form where the breakdown is clear
For items without receipts, such as offerings to temples or tips, make a note of the amount, date, and payee
Keep a record of who paid for the expenses (for later settlement and transparency in the division of the estate)

While records tend to get scattered in the hustle and bustle of a funeral, this extra effort will pay off when you file your tax return 10 months later.

Cautionary point: The risks of paying with the deceased's savings

This is the point I particularly want to emphasize this time.

In a previous column, I introduced the provisional payment system (up to 1.5 million yen per financial institution) that allows you to withdraw the deceased's savings even before the inheritance is divided. Paying for funeral expenses is exactly the type of use this system is intended for.

However, there is something I would like you to remember.

If there is even the slightest possibility of renouncing the inheritance, do not touch the deceased's savings lightly.

Using money withdrawn through the provisional payment system may be considered as disposing of the inherited property, which could be deemed as simple acceptance, potentially making it impossible to renounce the inheritance. This applies even within the three-month deliberation period.

You might think, "Isn't it okay if it's for funeral expenses?" It is true that there have been cases where using funds for funeral expenses within a socially reasonable range was not judged as simple acceptance. However, that line is drawn on a case-by-case basis and is not guaranteed.

The safe approach in practice is as follows:

If there is even the slightest possibility that the deceased had debts, pay the funeral expenses out of your own pocket for the time being.
Only pay from the deceased's savings after you have decided not to renounce the inheritance.
Keep receipts for the expenses you covered yourself and settle them from the inherited property later.

"I paid from the deceased's account even though I might have renounced the inheritance"—this one step could lead to inheriting the debts as well. It is crucial not to get the order wrong.

Also, be aware that condolence money (koden) is not considered part of the inheritance.

In addition, here is one point I am often asked about.

Condolence money received from attendees is not part of the inheritance. It is considered a gift to the chief mourner and is exempt from inheritance tax (it is also exempt from gift tax and income tax as long as the amount is within reasonable limits).

Conversely, as mentioned earlier, the cost of return gifts for condolence money cannot be deducted—since the condolence money itself is tax-exempt, the return gifts are also outside the scope of tax calculations.

Summary: Don't miss what you can deduct, and don't get the order wrong.

Funeral expenses can be deducted from the inheritance. Offerings to monks and fees for posthumous Buddhist names are also acceptable if you have records.
Expenses for return gifts, memorial services, graves, and Buddhist altars cannot be deducted.
Keeping receipts and notes ensures the deduction
Do not pay from the deceased's deposits while there is a possibility of renunciation (paying out-of-pocket is safer)
Condolence money is not part of the inherited estate

Before and after a funeral, you are faced with a series of decisions while grieving. Knowing these two things—'what can be deducted' and 'which wallet to pay from'—will reliably reduce both your tax burden and your risks. Let's organize these one by one within the overall flow of inheritance.

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