The period between the end of January and the second week of April is widely known as âtax season.â Most people anticipate receiving a refund after filing their federal income tax returns. However, there are a number of scenarios that may bring up tax questions.Â For example, what taxes that can be assessed to a personâs estate upon their passing?
Estate taxes are commonly owed on the portion of an estate that exceeds the amount set by federal law. For the 2016 tax year, that amount is $5.45 million. However, there are a number of expenses that can help in lowering the value of the estate to where federal taxes may not apply.
Indeed, executors of high-end estates would be well-served to know about these expenses. We will highlight a few through this post.Â
Â Administration Costs â The costs incurred in preserving the estate and distributing property are tax deductible. Examples of these costs include interest on loans acquired to preserve property of the estate, Â real estate appraisal fees, accounting expenses, as well as court costs.
Attorneyâs Fees â If you have to hire an attorney to defend the estate or pursue an entity on behalf of the estate (for unpaid debts, for example), these fees may also be tax deductible. Â
Executorâs Commissions â Lastly, executors should be compensated for the time and effort expended in ensuring that the estate is properly distributed. The commission paid must be based on commonly accepted standards for estates of similar size and character.
If you have questions about proper tax deductible administration fees, an experienced attorney can help.