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Final Regulations for Estate and Non-Grantor Trust Deductions, 100 Percent Bonus Depreciation

Anyone who has prepared tax returns professionally knows that change is the rule, not the exception. When tax laws change, the Internal Revenue Service has the unenviable task of making sense of legislation or executive actions that directly impact the tax industry.

Yesterday, the IRS announced the publication of two sets of final regulations that each address a change implemented by the Tax Cuts and Jobs Act (TCJA): estate and non-grantor trust deductions, and 100 percent bonus depreciation.

What are the final regulations on deductions for estates and non-grantor trusts?

The final regulations on deductions for estates and non-grantor trusts explain which deductions can be used to figure adjusted gross income. The IRS notes that this clarification is needed because “the TCJA prohibits individuals, estates, and non-grantor trusts from claiming miscellaneous itemized deductions for any taxable year beginning after December 31, 2017, and before January 1, 2026.”

Despite the TCJA temporarily taking miscellaneous itemized deductions off the table, the IRS identifies a number of deductions that are allowed in the final regulations:

  • Deductions for costs paid or incurred in connection with the administration of the estate or trust which would not have been incurred if the property were not held in such estate or non-grantor trust.
  • The deduction concerning the personal exemption of an estate or non-grantor trust.
  • The distribution deductions for trusts distributing current income.
  • The distribution deductions for trusts accumulating income.

In section 1.642(h)-2(a) of the final regulations, the IRS notes that succeeding beneficiaries of terminated estates may also be allowed to deduct from their individual returns “last taxable year deductions … in excess of gross income.”

Review TD-9918 for full details.

What are the final regulations on 100 percent bonus depreciation deductions?

The TCJA allows an additional 100 percent bonus depreciation deduction for qualifying business property the year it’s placed in service. In the press release announcing the final regulations for this deduction, the IRS identifies some qualifying property:

  • Appliances
  • Computers
  • Equipment
  • Furniture
  • Machinery

“The deduction applies to qualifying property (including used property) acquired and placed in service after September 27, 2017,” the IRS explains. “The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.”

The IRS says the final regulations also include “rules for consolidated groups and rules for components acquired or self-constructed after September 27, 2017,” as well as “for larger self-constructed property on which production began before September 28, 2017.”

Review TS-9916 for full details.

Sources: IR-2020-216; IR-2020-217

Ryan Norton

Whether designing superheroes, penciling caricatures, or just doodling, I always knew I was going to earn some sort of art degree while in college. That was my goal before I decided to trade Edgar Degas for Edgar Allan Poe during a Freshman English class. The BA in English soon morphed into a double-major in English and Philosophy, eventually becoming an MA in English. It only makes sense that I learned of a writing opportunity for a local marketing firm while teaching a first-year college English course. Before I knew it, I was writing and editing tax-related articles for Taxing Subjects, and this has been my home since 2014.

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