Under current law, individuals and trusts may claim itemized deductions for certain miscellaneous expenses. Deductible miscellaneous itemized expenses include amounts paid for the production of income and for the management of property held for the production of income. Examples include investment advisory fees and trustee commissions. An individual is permitted to deduct these expenses only to the extent that all of their miscellaneous deductible expenses exceed 2 percent of their adjusted gross income. Estates and trusts are not subject to the 2 percent rule for those of their costs incurred in connection with the administration of an estate or trust that would not have been incurred if the trust’s property were not held in trust. Examples of expenses that escape the 2 percent rule include the portion of trustee commissions not allocable to investment advice, appraisal fees, probate court costs and certain legal fees.

Section 11045 of the Tax Cuts and Jobs Act (the Act), which was passed by the House and Senate on December 20 , takes away the deductibility of all expenses subject to the 2 percent limitation for the years 2018 through 2026. Unfortunately, the language of the Act does not create a clear exception for the expenses of estates that are not subject to the 2 percent rule. Because clarification is not expected before year end, trustees should make sure that all of these expenses incurred during 2017, including the portion of trustee commissions not subject to the 2 percent limitation, are paid before the end of the year. In addition, some consideration should be given to prepaying a portion of next year’s trustee commissions and other non-2 percent limited expenses.