Estates and trusts are taxed on their net income, so it’s important to know deductible expense categories. Expenses will offset income and any remaining loss flows through as a deduction on the beneficiary’s personal tax return. The deduction can be significant, so it’s worth the effort to track the expenses for each year the estate or trust is in existence:
Annual administrative expenses should be tracked by category on an excel sheet:
– Legal fees, Accounting fees, Probate fees
– Bank, Notary and any other fees
– Postage, copies, misc expense
– Home maintenance costs while a residence is held in the estate or trust (utilities, property tax, insurance, security, landscape, clean out etc)
- If there was rental income to the trust or estate, track annual income and expenses for the rental property separately from other administrative expenses.
In the year of a home sale, report these separately from administrative expenses:
– Seller’s statement showing sale price, commissions etc. Form 1099-S (home sale report), if that was issued along with any state withholding forms from your realtor. Home sale reporting forms should be shared for tax prep.
– Home costs in preparation for sale (repairs and any staging cost or other fee that’s not on the seller’s statement)
Solano Avenue Tax 