The decedent’s personal exemption can be claimed in full on the final income tax return, provided the decedent could not be claimed as a dependent on someone else’s tax return. If deductions for the decedent are not itemized, the full amount of the standard deduction is allowed regardless of the date of death.
Unrecovered Investment in Pension
If the decedent was receiving a pension or annuity and died without a surviving annuitant, you can take a deduction for the decedent's investment that was not recovered. This deduction is a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit.
Net Operating Losses and Capital Losses
A net operating loss carried over from a prior year, and any capital losses, including carryovers, can only be deducted on the decedent's final income tax return. If the decedent’s final income tax return results in a net operating loss, this loss can be carried back and applied against taxable income for the prior three years. You cannot deduct any unused net operating loss or capital losses on the estate's income tax return.
Credits
Any income tax credits for which the decedent was eligible at the time of death may be claimed on the final income tax return.