The Death And Taxes Edition

Death and taxes may be inevitable, but the paperwork, decisions, and surprises that follow can feel anything but predictable. I’ve been thinking about that a lot since my dad died. Even a seemingly straightforward estate can quickly become complicated once you start dealing with final tax returns, retirement accounts, old records, state rules, and the accumulated belongings of a lifetime.

One of the biggest surprises for some taxpayers is how much geography matters. With the federal estate tax exemption set at $15 million per person for 2026, most families will not owe federal estate tax. But state estate taxes, inheritance taxes, and probate costs can still catch heirs off guard, especially in states with lower thresholds, unusual rules, or fees that function like a hidden levy.

The income tax side can be just as important. A final Form 1040 may still be required, and death can also trigger estate or trust income tax returns, questions about income in respect of a decedent, refund claims, and executor responsibility for unresolved tax debts. Inherited retirement accounts add another layer, especially after the SECURE Act and SECURE 2.0 changed the old stretch IRA rules for many beneficiaries.

And then there is the stuff. Clothes, photographs, furniture, collectibles, records, boxes in the attic, and the things nobody knows quite what to do with. Some items may have financial value, some may have sentimental value, and some may create tax, appraisal, or charitable deduction questions. The same is true for old tax records: some can be shredded, but records tied to inherited property, basis, estate administration, final returns, and post-death filings may need to be kept.

Planning for death is never just about taxes. It is about helping the people left behind know what to file, what to keep, what to value, what to move, and—sometimes hardest of all—what to let go. To help you out, we’ve gathered all of our Death and Taxes coverage in one place to help make that process a little easier to understand.

Please keep sending your emails and messages. Your questions inspired this series—and who knows? You may just inspire the next one, too.

And your kind words have been so appreciated (for those of you who have asked, Mom is doing amazing).

Enjoy your long weekend,

Kelly Phillips Erb (Senior Writer, Tax)

This is a published version of the Tax Breaks newsletter, you can sign-up to get Tax Breaks in your inbox here.

Questions

This week, a reader asks:

My parents are helping me buy a new car by loaning me the money. They are charging me some interest. Is that interest deductible under the new tax law?

Probably not. OBBBA created a new temporary deduction for certain car loan interest, but it does not apply to all car loans. To qualify, the loan generally has to be for a new, qualifying personal-use vehicle, and the vehicle must meet the U.S. final assembly rules. The deduction generally applies to the 2025 to 2028 taxable years (meaning those beginning after December 31, 2024, and before January 1, 2029).

You can deduct interest up to the $10,000 cap. Keep in mind that this is a deduction for interest paid, not the total car payment. And the deduction is subject to a phaseout. A phaseout means that the tax benefit decreases as your income increases. In this case, the deduction phases out with modified adjusted gross income over $100,000 ($200,000 for joint filers).

In your case, the bigger issue is that the loan is from your parents. Under the IRS’s proposed rules, a loan from a related party does not qualify for the new car loan interest deduction. So even if the car itself would otherwise qualify, the interest you pay to your parents would generally not be deductible under this new rule.

Your parents may also need to report the interest they receive from you as taxable interest income. If the interest rate is below the applicable federal rate, there may be additional below-market loan rules to consider.

Statistics, Charts, and Graphs

Foreign gifts are often not taxable income, but they can still trigger IRS reporting obligations. In Zhang v. IRS, a Chinese citizen who became a U.S. tax resident received about $287,000 in wedding gifts from family in China. Because foreign gifts from a nonresident alien or foreign estate must generally be reported on Form 3520 once they exceed $100,000 for the year, her failure to timely file the form resulted in a penalty, despite the fact that no tax was owed on the gifts themselves.

The court ruled that the IRS has the authority to assess those penalties administratively, meaning the agency does not have to sue first before trying to collect. Zhang’s case is not over, however: She may still argue reasonable cause, including that she relied on tax software and voluntarily corrected the mistake after discovering it.

The takeaway is that U.S. persons, including noncitizen tax residents, should treat large foreign gifts as a reporting issue, even when they are not an income tax issue. Understanding the rules is important, since noncompliance can result in significant penalties. If you have questions, check with your tax professional.

Taxes From A To Z: T is for Tax Court

The U.S. Tax Court is a federal court that hears disputes between taxpayers and the IRS, most commonly before the taxpayer has paid the disputed amount. That makes it an important forum for taxpayers who receive a notice of deficiency and want judicial review without first paying the tax and then suing in federal district court for a refund.

For example, let’s say that the IRS examines your tax return and proposes additional tax and penalties. If you do not agree with the proposed changes, the IRS generally will issue a Notice of Deficiency. It’s sometimes called a “90-day letter” because the notice gives you the right to file a Tax Court petition within 90 days, or 150 days if the notice is addressed to a person outside the United States.

Some smaller disputes may qualify for simplified “small tax case” procedures, sometimes called “S cases.” These procedures are generally available when the amount in dispute is $50,000 or less for any one tax year or period. However, small tax case decisions generally cannot be appealed and do not create precedent.

For tax practitioners, the Tax Court is especially significant because its opinions shape federal tax law and provide guidance on how statutes, Treasury regulations, and IRS positions are evaluated in litigation.

Tax Court opinions are published and precedential, which means that they can be cited as primary authority in a Tax Court proceeding. Memo opinions, on the other hand, are not published by the Tax Court, but are available on the court’s website. These opinions are not precedential, but they are often cited by taxpayers (and the Tax Court typically will give them weight).

Tax Trivia

For which tax year was the federal estate tax effectively repealed?

(A) 2000

(B) 2001

(C) 2010

(D) 2011

Find the answer at the bottom of this newsletter.

Positions And Guidance

The American Institute of Certified Public Accountants (AICPA) asked the IRS to issue automatic consent procedures that would allow taxpayers to switch from the inventory price index computation (IPIC) method to an internal index method after the Bureau of Labor Statistics (BLS) discontinued the Producer Price Index (PPI) categories it had used for LIFO calculations. The group says recent BLS changes have created practical problems for taxpayers and is also seeking clarification on replacement PPI categories, pool changes, and transition relief for taxpayers who have already filed using those categories.

The AICPA, in letters to Congress, said it supports legislation in the House and Senate that would codify Treasury’s 2025 interim rule limiting beneficial ownership information (BOI) reporting to foreign-owned entities, saying the bills provide relief for both small businesses and finance professionals.

Noteworthy

The Michigan Department of the Treasury sent out about 27,000 incorrect “Notice of Adjustment” letters to taxpayers who made estimated tax payments. The mistake is being blamed on an IT glitch.

Key Figures

Shakira is set to receive a refund of more than €55 million (about $64 million U.S.) after a Spanish court ruled in her favor in a long-running dispute over her 2011 taxes. The court found that Spanish tax authorities had not proven she was a Spanish tax resident that year, concluding that they could establish only 163 days in Spain and could not show that Spain was the main center of her activities or economic interests. Shakira had argued that she spent much of 2011 touring, performing 120 concerts. Spain’s tax agency has indicated it will appeal, likely delaying any refund.

The ruling is separate from Shakira’s earlier disputes over the 2012 through 2014 tax years. Spanish authorities had accused her of failing to pay €14.5 million in taxes, and she ultimately reached an agreement in 2023 that included a suspended sentence and financial penalties. (A separate 2018 tax case was dropped in 2024.)

Residency disputes are not limited to international celebrities. In the U.S., noncitizens can be treated as tax residents under the green card test or the substantial presence test, while many states apply their own rules based on day counts, domicile, or both. The lesson is that residency is often proved in the details. Taxpayers should keep records that show where they lived, worked, and traveled. Those can include utility bills, driver’s licenses, toll records, and travel logs. Receipts don’t lie (props if you get the reference).

Trivia Answer

The answer is (C) 2010.

The federal estate tax was effectively repealed for those who died in 2010 as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001, although executors could elect to apply the estate tax rules to take advantage of the step-up in basis which would have otherwise been lost.

(The federal gift tax, however, was not repealed that year.)

In December 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. That means that the federal estate tax returned in 2011.

The federal estate tax exclusion for decedents who die in 2026 is $15,000,000 per person (up from $13,990,000 in 2025) or $30,000,000 per married couple (up from $27,980,000 in 2025).

Worth A Second Look

The links, clips, and tax takes readers loved (and a few you may have missed):

You can find last week’s newsletter here.

Tax Filing Deadlines

📅 June 15, 2026. Due date for your 2026 Q2 estimated tax payment.

📅 June 15, 2026. Last day for U.S. taxpayers living abroad to file without a further extension (payment was still due April 15).

Tax Conferences And Events

📅 June 2-5, 2026. National Association of Black Accountants Insight 2026: WIN (We Invest Now) Convention & Expo, Aria, Las Vegas, Nevada.

📅 June 3-6, 2026. Tax Retreat—The Anticonference. San Antonio, Texas.

📅 June 8-11, 2026. AICPA Engage. ARIA Resort & Casino, Las Vegas, Nevada, & live online.

📅 June 22-25, 2026. Latino Tax Fest. MGM Grand Hotel & Casino, Las Vegas, Nevada.

📅 July 13-15, 2026. NATP Taxposium. Huntington Convention Center, Cleveland, Ohio.

Feedback

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