Gross Estate Deductions

The estate of a deceased person is subject to the following deductions:

1.) Expenses, losses, debts and taxes:

a.) Funeral expenses -must not be more than 5% of the gross estate and not more than Php200,000 (doesn't include expenses after the burial.)

b.) Court expenses for testate (with a will) or intestate (without a will) proceedings (including extra-judicial settlement.)

c.) Debts of the deceased where the papers of said debts are notarized when they were contracted. If the loan was made 3 years before the death of the person in question, there must be a statement showing the disposition of the loan proceeds.

d.) Collectible claims against insolvents (bad debts.)

e.) Unpaid mortgages.

f.) Casualty losses - uninsured, not claimed as a deduction from income tax, and mus be incurred before the last day of the filing of the estate tax return (6 months from the person's death, but may be extended for 30 days.) This includes theft.

g.) Unpaid income and real estate taxes.

2.) Vanishing deductions

To be exempt, the deduction must show all of the following:

a.) The deceased either inherited the property or received it as a donation.

b.) The property must have been acquired within 5 years before his death

c.) It forms part of the gross estate of the prior decedent (the one who died before the dead person in question) if it was inherited, or it must be a taxable gift of the donor (if donated.)

d.) The transfer tax was paid during the previous transfer.

e.) The property was identified as having come from the previous decedent or donor

f.) The estate of the prior decedent didn't avail of vanishing deduction of the property in question.

3.) Bequests, legacies, devises or transfers to the government for public purposes -they are deductible in full, but they must be mentioned in the tax return.

4.) Bequests, devises or transfers to social welfare or cultural organizations and charities.

5.) Standard deductions of Php1,000,000 -based on a BIR ruling, this doesn't need to be proven. It's automatic.

6.) Medical expenses up to Php500,000 incurred within 1 year before the person's death and supported by receipts.

7.) The Family Home -must determine if it's common or not.

Requires all of the following:

a.) The fair market value or zonal value (which ever is higher!) forms part of the gross estate.

b.) Certification by the Barangay captain as the actual residence at the time the person died.

c.) The deductible amount is only up to P1,000,000.

8.) Amount received by the heirs from the deceased's employer as a result of the death.

9.) The share of the surviving spouse (1/2 of the common estate.)