The IRS has determined that estates and nongrantor trusts in New York and around the country are now able to deduct certain expenses that are no longer considered miscellaneous deductions. Regulations have been released that offer clarity on the new rules and establish that these types of deductions should not be included in the same category of miscellaneous itemized deductions that are no longer reportable for individual filers.

Estates and trusts will now be allowed to deduct expenses for the administration of an estate or nongrantor trust if the expenses were incurred because related property was held in the estate or trust. Should the property have been owned outside of the trust or estate, the expenses to dispose of or manage the property would not be deductible.

Distribution deductions will also be permitted under the new regulations. This allows estates and qualifying trusts to utilize a deduction for any income that is distributed to beneficiaries, and the beneficiary will be required to report the income on their personal tax return. Additionally, estates and trusts will be able to deduct personal exemptions as well as take the distribution deduction for accumulating income.

The new rules apply to estate and trust returns filed after the regulations are published. However, the IRS is allowing filers to apply these rules to returns filed after the Tax Cuts and Jobs Act became effective.

Understanding the complex functions of estates and trusts can be difficult without proper direction. Seeking the advice of an experienced trust attorney can help to simplify these complexities for you and make estate planning not such a daunting task. A trust attorney could also help you protect the assets of your trust or estate so that the IRS and the state department of revenue do not not get any more than their fair share.