When someone dies, the IRS sees two taxpayers where there used to be one — the person, for the part of the year they were alive, and the estate, for everything that comes after. Sorting out who files what is one of the first practical jobs of settling an estate. Here's the map.

Two returns, one year

The year of death gets split in two. Everything your loved one earned while alive — wages, pension, interest, dividends up to the date of death — belongs on their final Form 1040, the same personal return they filed every year. Income that arrives after death — a final paycheck, interest that posts later, a retirement distribution — generally belongs to the estate, reported on Form 1041.

That second taxpayer, the estate, is brand new. It needs its own tax ID — an EIN — and it exists until the estate is fully settled and the assets distributed.

The final 1040

The final personal return covers January 1 through the date of death. It works like any other 1040 and is due April 15 of the year after death. If your person was married, the surviving spouse can usually still file a joint return for that year — often the most favorable option. A few things that trip people up:

You write "deceased," along with the date of death, across the top, and the personal representative signs it.
A refund owed to the deceased may require Form 1310 to release.
Medical bills paid in the final year can sometimes be deducted — keep the receipts.

Form 1041: the estate's income tax

Once the estate starts earning — interest in the estate bank account, a dividend, rent on a property — it may owe income tax of its own. Form 1041 is generally required once the estate has $600 or more of gross income in a tax year. The estate can choose a calendar year or a fiscal year, which gives you useful flexibility in timing. Income the estate passes through to beneficiaries is reported to them on a Schedule K-1, and they pay the tax on their own returns.

Don't confuse this with the federal estate tax (Form 706). That's a separate, much rarer filing — it applies only to very large estates above the federal exemption (in the millions), and it's due nine months after the date of death. Most estates never file one. But if it might apply, that nine-month clock is real and unforgiving, so flag it early.

The basis step-up — the quiet gift

Here's the rule that saves heirs the most money and gets noticed the least. When you inherit an asset, its cost basis usually resets to its fair market value on the date of death — the "step-up." If your mother bought stock decades ago for $10,000 and it's worth $90,000 when she dies, your basis becomes $90,000. Sell it the next week and you owe almost nothing in capital gains. The decades of growth simply aren't taxed.

This is why getting date-of-death valuations for real estate, brokerage accounts, and other appreciated assets matters — they set the baseline for any future sale. (One notable exception: retirement accounts like IRAs don't get a step-up.)

State taxes vary — a lot

On top of the federal picture, most states want a final state income tax return, and a handful impose their own estate or inheritance taxes with their own thresholds and deadlines — some far lower than the federal exemption. A few tax the people who inherit rather than the estate itself. Because the rules differ so widely, this is the piece most worth checking against your specific state early.

The deadlines that actually bite

April 15 — the final 1040 (the year after death).
The estate's 1041 — the 15th day of the 4th month after its chosen tax year ends.
Nine months after death — federal estate tax return (706), if required, and the window to elect "portability" of a spouse's unused exemption.
Quarterly — the estate may owe estimated taxes once it has meaningful income.

The honest summary: the final 1040 is familiar territory, the 1041 is the new one to learn, and the nine-month deadlines are the ones you don't want to discover late.

This guide is general information, not legal or tax advice. Tax rules change and depend on your specific situation and state. Talk to a qualified attorney or tax professional before acting on anything here.