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Estate administration costs that are tax deductible

Through a number of our posts we have addressed tax issues for individuals, there are some people who may encounter tax questions (and issues) that have nothing to do with their individual incomes.  A perfect example of this class of tax questions involves taxes that can possibly be assessed to a deceased person’s estate.

Indeed, estate taxes are commonly paid on those that exceed the amount set by federal law. However, there are a number of expenses that can serve to lower the value of the estate to a point where taxes may not apply. It is important for executors to be familiar with these expenses. With that, we will highlight a few through this post. 

 Administration Costs – Executors should know about the costs incurred in preserving and distributing property of the estate. These may include appraisal fees, accounting expenses, court costs as well as interests on loans acquired to preserve or make improvements to real estate.

Attorney’s Fees – While you may not think about attorney’s fees in the sense that lawsuits may be necessary within probate, but it is not uncommon for creditors to initiate lawsuits against an estate to collect on unpaid debts. So if you must hire an attorney to defend the estate, these fees are also tax deductible.  

Executor’s Commissions – Of course, the time and effort that an executor expends in making sure that the estate is properly distributed can justify a commission. Like the fees for other professional services, the commission must be based on commonly accepted standards for estates of similar size and character.

 

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Law Offices of Robert T. Leonard, APC

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