Originally appeared in Estate Planning, a Thomson Reuters publication. Copyright 2018 Thomson Reuters/Tax & Accounting.
Many deductions allowed to an individual for federal income tax purposes for certain expenses or costs incurred have been permanently eliminated, or suspended or limited until 2026 by the 2017 Tax Act (“Act – also commonly known as the Tax Cuts and Jobs Act) for years after 2017. The deduction under Section 164 for state and local income, sales, and property taxes has been limited to $10,000 annually for individual taxpayers including estates of decedents and non-grantor trusts through 2025.
A married couple filing a joint return faces the same $10,000 limit as do all other individual taxpayers except for a married person filing separately, where the limit is $5,000 a year. This $10,000 limit applicable to joint filers is a significant new marriage penalty. Further, the $10,000 in not indexed for inflation.
The standard deductions for married couples has been increased to $24,000 and to $12,000 for other individual taxpayers (but without any standard deduction for a decedent’s estate or for a non-grantor trust). A taxpayer who uses the standard deduction many not deduct the expenses and costs still allowed under the Code.
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