The Tax Cuts and Jobs Act (“TCJA”) resulted in confusion as to the tax treatment of deductions reported by trusts and estates to its beneficiaries so that many allowable deductions were not taken.

Effective October 19, 2020, the IRS issued final regulations providing that certain Estate & Trust expenses are not subject to the suspension of miscellaneous itemized deductions in tax years 2018 through 2025. (09/21/2020)

What does this mean for you?

  • This new guidance can provide fiduciaries and beneficiaries with the opportunity to amend 2018 and 2019 fiduciary and individual tax returns so that beneficiaries can claim the excess deductions on previously filed tax returns.
  • This may be an opportunity to obtain federal and state refunds.

Details

The IRS has clarified that deductions are not suspended for:

 

  • Costs incurred in connection with the administration of the estate or trust that would not have been incurred if the property were not held in the estate or trust.
  • The personal exemption deduction for estate and trusts.
  • Trusts distributing current income.
  • Estate and trusts accumulating income or distributing corpus.
  • Furthermore, the final regulations provide guidance on determining the character and amount, as well as the manner for allocating excess deductions that beneficiaries of a terminated estate may claim on their individual income tax returns.

 Contact Us

 

We are here to help with your Estate & Trust Federal, State and Gift tax and accounting needs.

If you want more information or need help with tax planning and preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612.  Or contact us online.