Cemeteries can be tax exempt, but only when they operate on a nonprofit basis. A qualifying nonprofit cemetery pays no federal income tax under Section 501(c)(13) of the Internal Revenue Code, and most states exempt its land and buildings from local property tax. For-profit cemeteries get neither break and are taxed like any other business, with one narrow exception for perpetual care fund distributions.
Which Cemeteries Qualify for Federal Exemption
Section 501(c)(13) recognizes two kinds of cemetery organizations. The first is a nonprofit mutual cemetery company, owned and operated for the benefit of its plot owners, which may also bury indigent people as a charitable sideline. The second is a nonprofit cemetery corporation or crematorium chartered solely for disposing of human remains by burial or cremation, whose charter forbids any unrelated business and whose net earnings cannot benefit any private individual.
Both categories share one non-negotiable trait: the organization must actually be nonprofit. The IRS has said the exemption “was not contemplated for cemeteries operated in the ordinary commercial manner to make profits for individuals.”1Internal Revenue Service. J. Cemeteries If profits flow to owners, shareholders, or insiders, the cemetery does not qualify no matter how its paperwork reads. Officers and employees may draw reasonable compensation, but that’s the limit.2Office of the Law Revision Counsel. 26 USC 501 – Exemption From Tax on Corporations, Certain Trusts, Etc.
A cemetery seeking recognition files Form 1024 with the IRS and demonstrates it meets the structural and operational requirements of one of the two categories.
What the Federal Exemption Covers
Once recognized, a 501(c)(13) cemetery pays no federal income tax on revenue from activities tied to its burial or cremation purpose.2Office of the Law Revision Counsel. 26 USC 501 – Exemption From Tax on Corporations, Certain Trusts, Etc. That includes plot sales, burial and cremation fees, and investment income from perpetual care funds.
Perpetual care funds work as follows. When a nonprofit cemetery collects money at the time of a plot sale and invests it to pay for long-term grounds maintenance, the fund is treated as part of the exempt organization. The investment income it earns stays tax-free so long as the fund is used for care and upkeep of the cemetery grounds.
Income That Is Still Taxable
Exemption is not blanket immunity. If a 501(c)(13) cemetery runs a trade or business that is not substantially related to burial or cremation, the net income from that activity is subject to the unrelated business income tax.3Office of the Law Revision Counsel. 26 USC 511 – Imposition of Tax on Unrelated Business Income of Charitable, Etc., Organizations The fact that the cemetery needs the money, or spends the profits on exempt activities, does not make the activity itself related.4Office of the Law Revision Counsel. 26 USC 513 – Unrelated Trade or Business
Common trouble spots: renting the chapel for weddings unrelated to memorial services, or running a flower shop open to the general public. Income from those ventures is taxable at standard corporate rates. Two exceptions worth knowing: if substantially all the work is done by unpaid volunteers, or if the business mainly sells donated merchandise, the income is not treated as unrelated business income.4Office of the Law Revision Counsel. 26 USC 513 – Unrelated Trade or Business
Property Tax at the State and Local Level
Property taxes are set by state and local law, so the details vary. The broad pattern is consistent, though: land and structures used exclusively for burial and related purposes are exempt from local property taxes when owned by a nonprofit cemetery. That typically covers the burial grounds, mausoleums, on-site chapels, and administrative buildings that directly support cemetery operations.
Undeveloped land held for future burials usually qualifies too, provided the cemetery genuinely intends to use it for interments and is not holding it for speculation or unrelated commercial use. Many jurisdictions require the cemetery to apply for the exemption rather than granting it automatically, and some require periodic renewal. Letting the application lapse, or shifting the property to a non-exempt use, ends the exemption.
Sales Tax on Cemetery Purchases
Sales tax turns on what is being sold. Charges for perpetual care, annual maintenance, gravesite upkeep, and the opening and closing of a grave are generally treated as services and are often not subject to sales tax.
Tangible items are treated differently. Caskets, urns, burial vaults, and grave markers are tangible personal property, and most states apply their standard sales tax rate to them. Installation charges for monuments and markers may also be taxable, though some states exempt separately stated labor. Buying these items from the cemetery rather than a third-party retailer does not generally change the tax outcome.
For-Profit Cemeteries
A cemetery that operates for profit does not qualify under 501(c)(13) and is taxed as an ordinary business corporation.1Internal Revenue Service. J. Cemeteries Revenue from plot sales, services, and merchandise goes into gross income, and the company pays corporate income tax on net profits. For-profit cemeteries also generally do not receive property tax exemptions, though that depends on the state.
One narrow federal break applies. Under IRC Section 642(i), a perpetual care fund created by a taxable cemetery corporation under local law can deduct distributions it makes for the care and maintenance of gravesites. The deduction is capped at $5 multiplied by the total number of gravesites the corporation has sold before the beginning of the fund’s tax year.5Office of the Law Revision Counsel. 26 USC 642 – Special Rules for Credits and Deductions The fund must actually spend the distributed money on gravesite maintenance before the end of the following tax year for the deduction to hold.6eCFR. 26 CFR 1.642(i)-1 – Certain Distributions by Cemetery Perpetual Care Funds
Annual Filings That Keep the Exemption in Place
Exempt status does not free a cemetery from paperwork. Most 501(c)(13) cemetery companies must file an annual information return with the IRS, and the form depends on size.7Internal Revenue Service. Cemetery Companies – IRC Section 501(c)(13)
- Gross receipts normally $50,000 or less: Form 990-N, the electronic “e-Postcard,” a brief online submission.
- Gross receipts under $200,000 and total assets under $500,000: Form 990-EZ.8Internal Revenue Service. 2025 Instructions for Form 990
- Gross receipts of $200,000 or more, or total assets of $500,000 or more: the full Form 990.8Internal Revenue Service. 2025 Instructions for Form 990
This is where small cemetery associations get burned. If a tax-exempt cemetery fails to file its required annual return for three consecutive years, the IRS automatically revokes its exempt status. No warning letter, no grace period. The revocation takes effect on the filing due date of the third missed return.9Internal Revenue Service. Automatic Revocation of Exemption After that, the cemetery must reapply from scratch, and income earned during the lapsed period may be taxable. For a volunteer-run association that assumed the e-Postcard was optional, filing a few minutes a year is the difference between keeping exempt status and losing it.