November 12, 2014

As we climb closer to the end of the year, many people are concerned with increasing tax deductible expenses. One of the common questions involves whether estate planning fees are deductible for income tax purposes. The short answer is that these can be deductible, but that it depends.

Estate planning fees are deductible if the purpose of the estate planning meets one of the following criteria:

• The collection or production of income
• Management, maintenance, or conservation of property that is held for the purpose of income production
• Tax planning and tax advice

The above three bullet points are examples of miscellaneous itemized deductions but the fees associated with the estate planning are subjected to a 2% AGI (adjusted gross income) floor. Personal legal expenses, like legal costs to prepare a will, are not deductible. The same goes for basic powers of attorney and medical directives. If you’re putting together comprehensive plans with credit trusts to reduce estate taxes and revocable trusts to avoid probate, however, these can be tax deductible.

You’ll want to discuss the specifics about what portion of your estate planning fee is tax deductible, but doing so can help reduce what you owe in personal income taxes. Contact the professionals at Shah & Associates to get a jump start on your tax planning and earn that tax deduction by emailing us for an appointment at info@lawesq.net.