IRS Rule

• Although many rules and regulations published by the Internal Revenue Service are complex and leave room for maneuver, the IRS publication covering medical and dental expenses unequivocally states that you cannot deduct funeral or burial expenses from your taxable gross income. The relationship of the person whose burial and funeral costs you are paying does not matter either. No matter how close a family member he was, and even if the individual was a "dependent" for tax purposes, the funeral is not a deductible expense item.
  
  

Medical Expenses

• While you cannot deduct the funeral expenses of your parent, you may be able to write-off some or all of the cost of the medical care she received before passing away, if you can claim the parent as a dependent and have paid for such expenses out of pocket.
  Medical expenses are only deductible to the extent they exceed 7.5 percent of your taxable gross income for a given year. Your total expenses include the amount you pay out of pocket for yourself, as well as your dependents.
  
  

Qualified Expenses

• Qualified medical expenses for you and your dependents include doctor and hospital fees, the cost of prescription medication as well as insulin, which is deductible even though some kinds are available without a prescription. Medical equipment, such as wheelchairs and crutches, and transportation expenses to and from medical facilities are also deductible.
  What may be particularly relevant if your parent has deceased recently is that the cost of long-term care services and nursing home fees, where your parent might have spent the last days of his life, also qualify as deductible expenses if your parent is a dependent of yours.
  
  

Parents as Dependents

• You can only deduct the medical expenses of a parent if you claim her as a dependent on your tax return. To do so, all of the following conditions must be met:
  Your parent must be a citizen or resident of the U.S. or reside in either Canada or Mexico.
  Your parent must file an individual, not a joint, return for the year during which you will claim her as a dependent.
  Your parent's gross income, excluding Social Security payments, must be less than $3,650 for the 2011 year. Please note this income limit can change annually.
  You must have paid for more than half of your parent's expenditures during the year.