Are Estate Planning Fees Tax Deductible?
Prior to 2018, the IRS did allow itemized deductions on eligible estate planning fees until the Tax Cuts and Jobs Act of 2017 (TCJA) changed that rule. This means that estate planning fees are no longer deductible from your taxable income. However, these changes will be up for renewal in 2025.
Is Estate Planning Tax Deductible?
As outlined above, estate planning fees are no longer tax deductible thanks to the TCJA enacted at the end of 2017. Before that time, the IRS considered estate planning fees to be tax deductible.
In 2025, estate planning fees, such as associated legal fees, may be eligible for future tax deductions.
Previous Estate Planning Deductions
Before these tax reform changes occurred, some estate planning fees were eligible for itemized deductions per IRS rules. Less complicated matters like guardianship or property transfers were not tax deductible, as the IRS considered these personal expenses.
Under Schedule A rules for miscellaneous deductions, the IRS used to allow taxpayers to deduct some fees associated with estate planning. These deductions included expenses incurred due to the following:
- Tax advice, accounting, and preparation from a tax professional.
- The collection or production of income, such as investment advice.
- The management, maintenance, or conservation of real estate considered income-producing property.
- Legal expenses for wills, trusts, powers of attorney, and other legal documents.
Estate Planning Fees Are No Longer Tax Deductible
Since the Tax Cuts and Jobs Act is now in effect, taxpayers can no longer deduct estate planning fees as miscellaneous deductions. However, this may only have a minimal impact on most taxpayers.
Prior to the reform, taxpayers were only allowed to deduct expenses related to the production of taxable income. In order to qualify, the miscellaneous expenses had to exceed 2% of the taxpayer’s adjusted gross income (AGI). AGI is used to determine an individual’s taxable income. This number is calculated by taking an individual’s total income and subtracting adjustments like:
- Select medical expenses.
- Pre-tax retirement contributions.
- Alimony.
- And more.
These items are then subtracted from the taxpayer’s taxable estate. Even after the deductions cleared the AGI bar at 2%, these deductions still had to exceed the individual’s standard deduction amount in order to qualify.
Conclusion
It is possible that these fees will become tax deductible again at some point in the future. Most provisions of the Tax Cuts and Jobs Act will remain in effect until the end of 2025. When that time comes, Congress will decide whether or not to renew the changes.
Source:
- Are Estate Planning Fees Deductible? Retrieved March 19, 2025 from https://www.findlaw.com/estate/planning-an-estate/are-estate-planning-fees-really-tax-deductible-.html
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