While individual taxpayers currently cannot claim miscellaneous itemized deductions through 2025, certain deductions for estates and non-grantor trusts remain available under IRS guidance. This distinction is critical for fiduciaries, estate administrators, and beneficiaries navigating tax filings.
Recent proposed guidance from the IRS has clarified which deductions are not classified as miscellaneous itemized deductions and therefore continue to be fully deductible when calculating adjusted gross income (AGI).
Deductions Estates and Trusts Can Still Claim
The following expenses are still deductible for estates and non-grantor trusts:
- Administration Costs
Expenses paid or incurred in administering an estate or trust — which would not exist if the property weren’t held in that form — are deductible. - Personal Exemption for Estates and Trusts
The IRS still allows estates and non-grantor trusts to claim their personal exemption. - Distributions of Current Income
Trusts that distribute income currently can deduct those amounts. - Accumulated Income Distributions
Trusts distributing accumulated income may also qualify for deductions, subject to distribution deduction rules.
Excess Deductions After Termination: What Beneficiaries Should Know
The IRS also clarified how beneficiaries may handle excess deductions when an estate or non-grantor trust terminates. These deductions may pass through to individual beneficiaries if they succeed to the property, and may be reported on their personal tax returns.
Key points include:
- Determining the nature (ordinary, capital, etc.) of the deduction.
- Calculating the amount allocable to each beneficiary.
- Following the correct reporting method for deductions claimed on Form 1040.
Understanding how to apply these deductions can make a significant impact on the beneficiary’s taxable income and ensure accurate reporting.
Need Guidance? We’re Here to Help
If you’re managing an estate or trust — or are a beneficiary navigating the tax implications — our team can help you apply these rules correctly and maximize allowable deductions. Contact our office with any questions or to schedule a consultation.