For taxpayers in Florida and around the country, the passage of the Tax Cuts and Jobs Act ended their ability to claim certain deductions. However, the Internal Revenue Service recently published proposed regulations that clarify that estates and trusts are allowed to claim certain types of deductions because they are not “miscellaneous” deductions.
If the regulations are passed and enacted, estates and trusts would be able to claim several deductions. They could deduct the costs of administering the assets held by the estate or trust if the costs would not have been incurred if the assets were not held within the trust or estate. The estate or nongrantor trust would also be able to claim the personal exemption. Trusts could deduct the distribution deduction for the distributions that they made to beneficiaries of earned income. Both estates and trusts could also deduct the distributions that they make for accumulated income. Excess deductions that are passed on to the beneficiaries once a trust terminates will retain their separate nature and be allocated to the beneficiaries.
People can comment on the proposed regulations for 45 days from May 11, which is the date that they were published in the Federal Register. The rules would apply for tax years through 2026.
People who serve as trustees or executors are tasked with administering the trusts or estates for the benefit of the beneficiaries. Part of the duties involved with administering trusts and wills includes filing estate or trust tax returns. People who are uncertain of how to perform their duties as executors or successor trustees may want to consult with experienced estate planning lawyers. The attorneys might offer guidance on the various tasks required to administer the trust or estate and help their clients to avoid making potentially costly errors.