Estate Tax – Deducting Administration Expenses from Parent’s Estate

Michael Lodge

By Michael Lodge

When clients come into the office to meet with their tax practitioner, we get all kinds of questions.

Question:  How do I deduct the administration expenses of my father’s estate?

So let’s get to the answer.  Many of you may have tax questions on this if your parents had a trust and you are involved.  You can deduct the expenses incurred by an estate for its administration either as an expense against the estate and generation-skipping transfer (GST) tax or the annual income tax against the estate.

  • You may deduct the expense from the gross estate in figuring the federal estate tax (form 706), United States Estate (and Generation-Skipping Transfer) Tax Return, or
  • You may deduct the expense from the estate’s gross income in figuring the estate’s income tax on Form 1041, U.S. Income Tax Return for Estates and Trusts.
  • However, you cannot claim theses expenses for both estate tax and income tax purposes.
  • In most cases, these rules also apply to expenses incurred in the state of property by the estate.

In general, administration expenses deductible in figuring the estate tax include:

  • Fees paid to the fiduciary for administering the estate;
  • Attorney, accountant, and return preparer fees;
  • Expenses incurred for the management, conservation, or maintenance of property;
  • Expenses in connection with the determination, collection, or refund of the Estate’s tax liability.

If you are involved with a estate of your parents make sure you have a good estate attorney and a tax accountant that can advise you on tax issues relating to the estate or trust.

For more questions you may write to:  tax@icontaxgroup.com