Limitations on Deductions — 2025 Inst 1041 (PDF)

At-Risk Loss Limitations Generally, the amount the estate or trust has “at-risk” limits the loss it can deduct for any tax year. Use Form 6198,

At-Risk Limitations, to figure the deductible loss for the year and file it with Form 1041. For more information, see Pub. 925, Passive Activity and At-Risk Rules.

Passive Activity Loss and Credit Limitations

In general. Section 469 and the regulations thereunder generally limit losses from passive activities to the amount of income derived from all passive activities. Similarly, credits from passive activities are generally limited to the tax attributable to such activities. These limitations are first applied at the estate or trust level.

Generally, an activity is a passive activity if it involves the conduct of any trade or business, and the taxpayer does not materially participate in the activity. Passive activities don’t include working interests in oil and gas properties. See section 469(c)(3).

Note: Material participation standards for estates and trusts haven’t been established by regulations.

For a grantor trust, material participation is determined at the grantor level.

If the estate or trust distributes an interest in a passive activity, the basis of the property immediately before the distribution is increased by the passive activity losses allocable to the interest, and such losses can’t be deducted. See section 469(j)(12).

Tip: Losses from passive activities are first subject to the at-risk rules. When the losses are deductible under the at-risk rules, the passive activity rules then apply.

Rental activities. Generally, rental activities are passive activities, whether or not the taxpayer materially participates. However, certain taxpayers who materially participate in real property trades or businesses aren’t subject to the passive activity limitations on losses from rental real estate activities in which they materially participate. For more details, see section 469(c)(7).

For tax years of an estate ending less than 2 years after the decedent’s date of death, up to $25,000 of deductions and deduction equivalents of credits from rental real estate activities in which the decedent actively participated are allowed. Any excess losses or credits are suspended for the year and carried forward.

Portfolio income. Portfolio income isn’t treated as income from a passive activity, and passive losses and credits generally may not be applied to offset it. Portfolio income generally includes interest, dividends, royalties, and income from annuities. Portfolio income of an estate or trust must be accounted for separately.

Forms to file. See Form 8582, Passive Activity Loss Limitations, to figure the amount of losses allowed from passive activities. See Form 8582-CR, Passive Activity Credit Limitations, to figure the amount of credit allowed for the current year.

Business Interest Business interest expense could be limited. For more information about limitations on deductions for business interest, see section 163(j) and Line 10, later.

Transactions Between Related Taxpayers Under section 267, a trust that uses the accrual method of accounting may only deduct business expenses and interest owed to a related party in the year the payment is included in

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the income of the related party. For this purpose, a related party includes:

A grantor and a fiduciary of any trust;
A fiduciary of a trust and a fiduciary of another trust, if the same person is a grantor of both trusts;
A fiduciary of a trust and a beneficiary of such trust;
A fiduciary of a trust and a beneficiary of another trust, if the same person is a grantor of both trusts;
A fiduciary of a trust and a corporation more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust; and
An executor of an estate and a beneficiary of that estate, except for a sale or exchange to satisfy a pecuniary bequest (that is, a bequest of a sum of money).

Line 10—Interest Enter the amount of interest (subject to limitations) paid or incurred by the estate or trust on amounts borrowed by the estate or trust, or on debt acquired by the estate or trust (for example, outstanding obligations from the decedent) that isn’t claimed elsewhere on the return.

If the proceeds of a loan were used for more than one purpose (for example, to purchase a portfolio investment and to acquire an interest in a passive activity), the fiduciary must make an interest allocation according to the rules in Temporary Regulations section 1.163-8T.

Don’t include interest paid on indebtedness incurred or continued to purchase or carry obligations on which the interest is wholly exempt from income tax.

Personal interest isn’t deductible. Examples of personal interest include interest paid on:

Revolving charge accounts used to purchase personal-use property;
Personal notes for money borrowed from a bank, a credit union, or other person;
Installment loans on personal-use property;
Underpayments of federal, state, or local income taxes; and
Certain loans used to purchase vehicles for personal use. See Qualified passenger vehicle loan interest deduction, later.

Interest that is paid or incurred on indebtedness allocable to a trade or business (including a rental activity) should be deducted on the appropriate line of Schedule C, E, or F (Form 1040), the net income or loss from which is shown on line 3, 5, or 6 of Form 1041.

Types of interest to include on line 10 are:

Any investment interest (subject to limitations—see below),
Any qualified residence interest (see later), and
Any interest payable under section 6601 on any unpaid portion of the estate tax attributable to the value of a reversionary or remainder interest in property for the period during which an extension of time for payment of such tax is in effect.

Limitation on deduction of business interest. Business interest expense is limited to the sum of business interest income, 30% of the adjusted taxable income, and floor plan financing interest. Business interest expense includes any interest paid or accrued on indebtedness properly allocable

to a trade or business. A taxpayer, other than a tax shelter, that meets the gross receipts test is not required to limit business interest expense under section 163(j). A taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $31 million or less for the 3 prior tax years. Gross receipts include the aggregate gross receipts from all persons treated as a single employer such as a controlled group of corporations, commonly controlled partnerships or proprietorships, and affiliated service groups. If the taxpayer fails to meet the gross receipts test, Form 8990 is generally required.

Investment interest. Generally, investment interest is interest (including amortizable bond premium on taxable bonds acquired after October 22, 1986, but before January 1, 1988) that is paid or incurred on indebtedness that is properly allocable to property held for investment. Investment interest doesn’t include any qualified residence interest, or interest that is taken into account under section 469 in figuring income or loss from a passive activity.

Generally, net investment income (NII) is the excess of investment income over investment expenses. Investment expenses (other than interest) are deductible only to the extent they are allowable under section 67(e).

The amount of the investment interest deduction may be limited. Use Form 4952, Investment Interest Expense Deduction, to figure the allowable investment interest deduction.

If you must complete Form 4952, check the box on line 10 of Form 1041 and attach Form 4952. Then, add the deductible investment interest to the other types of deductible interest and enter the total on line 10.

Qualified residence interest. Interest paid or incurred by an estate or trust on indebtedness secured by a qualified residence of a beneficiary of an estate or trust is treated as qualified residence interest if the residence would be a qualified residence (that is, the principal residence or the secondary residence selected by the beneficiary) if owned by the beneficiary. The beneficiary must have a present interest in the estate or trust or an interest in the residuary of the estate or trust. See Pub. 936, Home Mortgage Interest Deduction, for an explanation of the general rules for deducting home mortgage interest.

See section 163(h)(3) for a definition of qualified residence interest and for limitations on indebtedness.

Qualified passenger vehicle loan interest deduction. Non-grantor trusts and decedents’ estates may be able to claim a deduction for qualified passenger vehicle loan interest (QPVLI) (see Qualified passenger vehicle loan interest, later) paid or accrued in 2025. In the case of a grantor trust, the eligibility of the grantor trust’s deemed owner to deduct the interest paid by the grantor trust as QPVLI is determined by disregarding the grantor trust and instead looking to the deemed owner to test whether all of the requirements for deductible QPVLI have been satisfied.

VIN required on the return. In order to take the QPVLI deduction, the non-grantor trust or decedent’s estate must attach a statement to its Form 1041 with the vehicle identification number (VIN) of the purchased applicable passenger vehicle (APV) (see Applicable passenger vehicle, later). If the non-grantor trust or decedent’s estate paid QPVLI allocable to multiple APVs, include the VIN of each APV.

24 Instructions for Form 1041 (2025)

If the purchased APV was replaced due to an unforeseen intervening event as described in Proposed Regulations section 1.163-16(c)(3)(ii), include the VIN of the substitute APV.

Maximum amount of deduction. A non-grantor trust or decedent’s estate can’t deduct more than $10,000 of QPVLI paid or accrued in 2025. The amount of the QPVLI deduction (after applying the $10,000 limit) is reduced if the AGI of the non-grantor trust or decedent’s estate is greater than $100,000.

To determine the AGI of the non-grantor trust or decedent’s estate, see Adjusted gross income (AGI), earlier.

Complete the No Tax on Car Loan Interest Worksheet to determine the amount of the QPVLI deduction.

The vehicle has at least 2 wheels.
The vehicle is a car, minivan, van, SUV, pickup truck, or motorcycle, and has a gross vehicle weight rating of less than 14,000 pounds.
The vehicle has undergone final assembly in the United States.

Final assembly in the United States. The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises. Non-grantor trusts or decedents’ estates can rely on that information label. Non-grantor trusts or decedents’ estates can also rely on the vehicle’s plant of manufacture as reported in the VIN to determine whether the vehicle has undergone final assembly in the United States. The VIN Decoder website for the National Highway Traffic Safety Administration provides plant of manufacture information. Non-grantor trusts or decedents’ estates can follow the instructions on that website to see if the vehicle’s plant of manufacture is located in the United States.

Applicable passenger vehicle. In general, an APV is any vehicle that meets the following conditions.

The original use of the vehicle starts with the non-grantor trust or decedent’s estate, or, in the case of a change in obligor by reason of the previous obligor’s death, the original obligor (a used vehicle does not qualify).
The vehicle is a motor vehicle manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails).

Qualified passenger vehicle loan interest (QPVLI). QPVLI is interest paid or accrued on a loan that meets all the following requirements.

The loan was originated after December 31, 2024.
The loan was originated by the non-grantor trust or decedent’s estate, or the non-grantor trust or decedent’s estate became the obligor on the loan by reason of the previous obligor’s death (see Change in obligor by reason of previous obligor’s death, later).
The proceeds from the loan were used to purchase an APV. Lease payments do not qualify.
The APV is for personal use (not expected to be used predominantly for business or commercial use; see Personal use, later).
The loan is secured by a first lien on the purchased APV. Change in obligor by reason of previous obligor’s death. If a loan that met these requirements at the time it was originated by a previous obligor, and the non-grantor trust or decedent’s estate became the obligor by reason of a previous obligor’s death, interest paid by the non-grantor trust or decedent’s estate on the loan is generally QPVLI if the loan continues to be secured by a first lien on the purchased APV. A change in obligor by reason of a previous obligor’s death could occur, for example, when a decedent’s estate succeeds to ownership of a decedent’s APV subject to a loan originated by the decedent. See Proposed Regulations section 1.163-16(d)(5). See Schedule 1-A (Form 1040) for the eligibility criteria applicable to an individual.

Personal use. “Personal use” means a use other than:

For the production of income. A non-grantor trust or decedent’s estate is considered to have purchased an APV for personal use if, at the time the non-grantor trust or decedent’s estate incurs a loan to purchase an APV, the non-grantor trust or decedent’s estate expects that the APV will be used for personal use for more than 50% of the time by any combination of the following: beneficiaries who have a present or future interest in the trust or estate; that beneficiary’s spouse; that beneficiary’s or spouse’s child, grandchild, great-grandchild, etc.; and that beneficiary’s or spouse’s brother, sister, stepbrother, stepsister, or his or her descendants.

QPVLI deducted elsewhere on Form 1041. If some of all of the QPVLI qualifies to be deducted in more than one place on the return, the non-grantor trust or decedent’s estate may choose where to report the deduction, but the non-grantor trust or decedent’s estate cannot deduct the same amount more than once. For example, if some of the interest on the loan is claimed as a deduction on Schedule C (Form 1040), Schedule E (Form 1040), or Schedule F (Form 1040), that interest cannot be claimed on line 10 as a QPVLI deduction.

Worksheet line 1. To determine the amount that should be entered on line 1, follow the steps below.

Use in any trade or business (except for the use in the trade or business of being an employee), or

Loan amount. Indebtedness that can be counted for purposes of determining QPVLI includes indebtedness incurred to finance the purchase price of the APV, as well as items or amounts that are customarily financed in an APV purchase transaction and that are directly related to the purchased APV. For example, this includes vehicle service plans, extended warranties, sales tax, and vehicle-related fees. Interest on items and services not customarily financed in an APV purchase transaction and that are directly related to the purchased APV, such as liability insurance, a trailer, or amounts representing debt on a vehicle traded in as part of the purchase transaction for the APV (so-called negative equity), is not eligible for the deduction.

Add together all interest paid or accrued in 2025 on a vehicle loan that qualifies as QPVLI.
Subtract any interest on the loan that was reported elsewhere on the return instead of on Form 1041.
If the amount determined after completing (1) and (2) is greater than $10,000, enter $10,000 on line 1. If the amount determined after completing (1) and (2) is less than or equal to $10,000, enter that amount on line 1.

Refinanced loan. If the non-grantor trust or decedent’s estate prior loan that had QPVLI is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction, so long as the new loan is secured by a first lien on the APV with respect to which the refinanced loan was incurred. The loan amount is limited to the outstanding balance of the refinanced loan as of the date of the refinancing.

Instructions for Form 1041 (2025) 25

No Tax on Car Loan Interest Worksheet Keep for Your Records

Computation to determine amount of the QPVLI deduction

1. Enter the amount of your paid or accrued QPVLI. See instructions. Don’t enter more than $10,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. Enter the estate’s or trust’s adjusted gross income. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . 2.

3. Enter $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Subtract line 3 from line 2. If zero or less, include the amount from line 1 in the entry you make on Form 1041, line 10, Interest. If more than zero, continue to line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

5. Divide line 4 by $1,000. If the result isn’t a whole number, increase it to the next higher whole number. (For example, increase 1.5 to 2 and increase 0.5 to 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Multiply line 5 by $200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Qualified car loan interest deduction. Subtract line 6 from line 1. If zero or less, enter -0-. Include this amount in the entry you make on Form 1041, line 10, Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

Worksheet line 2. To determine the non-grantor trust’s or decedent’s estate’s AGI, see Adjusted gross income (AGI), earlier.

Line 11—Taxes

Caution: The maximum deduction for state and local taxes is $40,000. This applies to the total of your state and local income taxes (or general sales taxes, if elected instead of income taxes), real estate taxes, and personal property taxes. The limitation does not apply to foreign income taxes, and state and local taxes paid or accrued in carrying on a trade or business or for the production of income.

Complete the State and Local Tax Deduction Worksheet, later, to see if your deduction is limited.

Worksheet line 2. To figure the estate’s or trust’s adjusted gross income, see Adjusted gross income (AGI), earlier.

Enter any deductible taxes paid or incurred during the tax year that aren’t deductible elsewhere on Form 1041. Deductible taxes include the following.

State and local income taxes. You can deduct state and local income taxes unless you elect to deduct state and local general sales taxes. You can’t deduct both.
State and local general sales taxes. You can elect to deduct state and local general sales taxes instead of state and local income taxes. Generally, you can elect to deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2025 if the tax rate was the same as the general sales tax rate. However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Sales taxes on motor vehicles are also deductible as a general sales tax if the tax rate was more than the general sales tax rate, but the tax is deductible only up to the amount of tax that would have been imposed at the general sales tax rate. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Also include any state and local general sales taxes paid for a leased motor vehicle.

Do not include sales taxes paid on items used in a trade or business. An estate or trust cannot use the Optional State Sales Tax Tables for individuals in the Instructions for Schedule A (Form 1040), Itemized Deductions, to figure its deduction.

State and local real property taxes.

Note: The deduction for foreign real property taxes is no longer allowed.

State and local personal property taxes.
Foreign or U.S. territory income taxes. You may want to take a credit for the tax instead of a deduction. See the instructions for Schedule G, Part I, line 2a, later, for more details.
The generation-skipping transfer (GST) tax imposed on income distributions.

Don’t deduct:

Federal income taxes;
Estate, inheritance, legacy, succession, and gift taxes;
Federal duties and excise taxes; or
Foreign real property taxes.

Safe harbor for certain charitable contributions made in exchange for a state or local tax credit. If you made a charitable contribution in exchange for a state or local tax credit and your charitable contribution deduction must be reduced as a result of receiving or expecting to receive the tax credit, you may qualify for a safe harbor that allows you to treat some or all of the disallowed charitable contribution as a payment of state and local taxes. The safe harbor applies if you meet the following conditions.

You made a cash contribution to an entity described in section 170(c).
In return for the cash contribution, you received a state or local tax credit.
You must reduce your charitable contribution deduction by the amount of the state or local tax credit you receive.

If you meet these conditions, and to the extent you apply the state or local tax credit to this or a prior year’s state or local tax liability, you may include this amount on line 11. To the extent you apply a portion of the credit to offset your state or local tax liability in a subsequent year (as permitted by law), you may treat this amount as state or local tax paid in the year the credit is applied. For more information about this safe harbor and examples, see Notice 2019-12 .

Line 12—Fiduciary Fees Enter the deductible fees paid or incurred to the fiduciary for administering the estate or trust during the tax year.

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State and Local Tax Deduction Worksheet Keep for Your Records

Fiduciary expenses include probate court fees and costs, fiduciary bond premiums, legal publication costs of notices to creditors or heirs, the cost of certified copies of the decedent’s death certificate, and costs related to fiduciary accounts.

Tip: Fiduciary fees deducted on Form 706 can’t be deducted on Form 1041.

Note: Fiduciary fees are allowable under section 67(e) if they are costs that are paid or incurred in connection with the administration of an estate or a non-grantor trust that would not have been incurred if the property were not held in such estate or trust. See Final Regulations - TD9918 and Regulations section 1.67-4 for more information.

Line 14—Attorney, Accountant, and Return Preparer Fees Expenses for preparation of fiduciary income tax returns, the decedent’s final individual income tax returns, and all estate and GST tax returns are fully deductible. However, expenses for preparing all other tax returns, including gift tax returns, are considered costs commonly and customarily incurred by individuals and are not deductible. For more information, see Final Regulations - TD9918 and Regulations section 1.67-4.

Line 15a—Other Deductions Attach your own statement, listing by type and amount all allowable deductions that aren’t deductible elsewhere on Form 1041.

Allowable deductions include all deductions listed in section 67(b) (including estate taxes attributable to IRD under section 691(c)), and other costs allowable under section 67(e) paid or incurred in connection with the administration of the estate or trust that would not have been incurred if the property were not held in the estate or trust.

Don’t include any losses on worthless bonds and similar obligations and nonbusiness bad debts. Report these losses, as applicable, on Form 8949.

Don’t deduct medical or funeral expenses on Form 1041. Medical expenses of the decedent paid by the estate may be deductible on the decedent’s income tax return for the year

incurred. See section 213(c). Funeral expenses are deductible only on Form 706.

Other costs paid or incurred by estates and non-grantor trusts. Under section 67(e), deductions are allowable for costs which are paid or incurred by an estate or non-grantor trust in connection with the administration of the estate or trust and would not have been incurred if the property were not held in such estate or trust.

In determining whether a cost is deductible by an estate or non-grantor trust, it must be determined whether the cost would be “commonly or customarily” incurred by a hypothetical individual owning the same property. If the cost would be deductible by a hypothetical individual, it is not deductible by the estate or non-grantor trust.

It is the type of product or service rendered to the estate or non-grantor trust in exchange for the cost, rather than the description of the cost of that product or service, that is determinative.

Costs that are incurred commonly or customarily by individuals include costs incurred in defense of a claim against the estate, the decedent, or the non-grantor trust that are unrelated to the existence, validity, or administration of the estate or trust. These amounts are not allowable deductions.

Ownership costs. Ownership costs are costs that are chargeable to or incurred by an owner of property simply by reason of being the owner of the property. These costs are commonly or customarily incurred by a hypothetical individual owner of such property and are not deductible by an estate or non-grantor trust. Under section 67(b), they include, but are not limited to, condominium fees, insurance premiums, maintenance and lawn services, automobile registration and insurance costs, and partnership costs deemed to be passed through to and reportable by a partner. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code.

Appraisal fees. Appraisal fees incurred to determine the FMV of assets as of the decedent’s date of death (or the alternate valuation date), to determine value for purposes of making distributions, or as otherwise required to properly

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prepare the estate’s or trust’s tax returns, or a GST tax return, are not incurred commonly or customarily by an individual and are deductible. The cost of appraisals for other purposes (for example, insurance) is commonly or customarily incurred by individuals and is not an allowable deduction.

Investment advisory fees. Fees for investment advice, including any related services that would be provided to any individual investor as part of an investment advisory fee, are incurred commonly or customarily by a hypothetical individual investor and are not deductible. However, certain incremental costs of investment advice beyond the amount that would normally be charged to an individual investor are deductible.

An incremental cost is a special, additional charge that is added solely because the investment advice is rendered to a trust or estate rather than to an individual, including balancing beyond the usual varying interests of current beneficiaries and remaindermen. The deductible portion of the investment advisory fees is limited to the amount of those fees, if any, that exceeds the fees normally charged to an individual investor. See Regulations section 1.67-4(b)(4).

Bundled fees. If an estate or non-grantor trust pays a single fee, commission, or other expense, such as a fiduciary’s commission, attorney’s fee, or accountant’s fee for both costs that are incurred commonly or customarily by individuals and costs (other than a de minimis amount) that are not incurred commonly or customarily by individuals, then (except to the extent provided otherwise by guidance published in the Internal Revenue Bulletin) the single fee, commission, or other expense (bundled fee) must be allocated between the costs that are incurred commonly or customarily by individuals, such costs not being deductible, and costs that are not incurred commonly or customarily by individuals, such costs being deductible.

There is an exception to the allocation rule if a bundled fee is not computed on an hourly basis. In this situation, only the portion of that fee that is attributable to investment advice is not deductible. The remaining portion is deductible.

Out-of-pocket expenses billed to the estate or non-grantor trust are treated as separate from the bundled fee and are not subject to allocation.

Estates and non-grantor trusts cannot deduct payments made from the bundled fee to third parties if such payments would not have been deductible if they had been paid directly by the estate or non-grantor trust.

Any reasonable method may be used to allocate a bundled fee, including without limitation the allocation of a portion of a fiduciary commission that is a bundled fee to investment advice. For more information, see Regulations section 1.67-4(c)(4).

Note: The reasonable method standard does not apply to determine the portion of the bundled fee attributable to payments made to third parties commonly or customarily incurred by an individual or to any other separately assessed expense commonly or customarily incurred by an individual, because those payments and expenses are readily identifiable without any discretion on the part of the fiduciary or return preparer.

For more information, see Regulations section 1.67-4.

Other Deductions Reported on Line 15a

Bond premium(s). For taxable bonds acquired before October 23, 1986, if the fiduciary elected to amortize the

premium, report the amortization on this line. If you made the election to amortize the premium, the basis in the taxable bond must be reduced by the amount of amortization.

For tax-exempt bonds, you can’t deduct the premium that is amortized. Although the premium can’t be deducted, you must amortize the tax-exempt bond by the amount of premium amortized.

For more information, see section 171 and Pub. 550. If you claim a bond premium deduction for the estate or trust, figure the deduction on a separate sheet and attach it to Form 1041.

Casualty and theft losses. Use Form 4684, Casualties and Thefts, to figure any deductible casualty and theft losses.

Estate’s or trust’s share of amortization, depreciation, and depletion not claimed elsewhere. If you can’t deduct the estate’s or trust’s apportioned share of amortization, depreciation, and depletion as rent or royalty expenses on Schedule E (Form 1040), or as business or farm expenses on Schedule C or F (Form 1040), itemize the estate’s or trust’s apportioned share of the deductions on an attached sheet and include them on line 15a.

Note: Don’t report the beneficiary’s apportioned share of depreciation, depletion, and amortization on line 15a. Report the beneficiary’s apportioned share of deductions in box 9 of Schedule K-1 (Form 1041).

Itemize each beneficiary’s apportioned share of the deductions and report them in the appropriate box of Schedule K-1 (Form 1041).

Section 179D. Enter any applicable deduction under section 179D for costs of energy efficient commercial business property placed in service during the tax year. Complete and attach Form 7205, Energy Efficient Commercial Buildings Deduction.

Line 15b—Net Operating Loss Deduction An estate or trust is allowed an NOLD under section 172.

If you claim an NOLD for the estate or trust, figure the deduction on a separate sheet and attach it to the return.

Line 18—Income Distribution Deduction If the estate or trust was required to distribute income currently or if it paid, credited, or was required to distribute any other amounts to beneficiaries during the tax year, complete Schedule B to determine the estate’s or trust’s income distribution deduction. However, if you are filing for a pooled income fund, don’t complete Schedule B. Instead, attach a statement to support the computation of the income distribution deduction. For more information, see Pooled Income Funds, earlier.

If the estate or trust claims an income distribution deduction, complete and attach:

Part I (through line 24) and Part II of Schedule I (Form

to refigure the deduction on a minimum tax basis, and

Schedule K-1 (Form 1041) for each beneficiary to which a distribution was made or required to be made.

Cemetery perpetual care fund. On line 18, deduct the amount, not more than $5 per gravesite, paid for maintenance of cemetery property. To the right of the entry space for line 18, enter the number of gravesites. Also enter “Section 642(i) trust” in parentheses after the trust’s name at the top of Form 1041. You don’t have to complete Schedule B of Form 1041, and Schedule K-1 (Form 1041).

28 Instructions for Form 1041 (2025)

Don’t enter less than zero on line 18.

Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes If the estate or trust includes IRD in its gross income, and such amount was included in the decedent’s gross estate for estate tax purposes, the estate or trust is allowed to deduct in the same tax year that the income is included that portion of the estate tax imposed on the decedent’s estate that is attributable to the inclusion of the IRD in the decedent’s estate. For an example of the computation, see Regulations section 1.691(c)-1 and Pub. 559.

If any amount properly paid, credited, or required to be distributed by an estate or trust to a beneficiary consists of IRD received by the estate or trust, don’t include such amounts in determining the estate tax deduction for the estate or trust. Figure the deduction on a separate sheet. Attach the sheet to your return.

Caution: If you claim a deduction for estate tax attributable to qualified dividends or capital gains, you may have to adjust the amount on Form 1041, page 1, line 2b(2); or Schedule D (Form 1041), line 22.

Also, a deduction is allowed for the GST tax imposed as a result of a taxable termination or a direct skip occurring as a result of the death of the transferor. See section 691(c)(3). Enter the estate’s or trust’s share of these deductions on line 19.

Qualified disability trusts. A qualified disability trust is allowed a $5,100 exemption. This amount is not subject to phaseout.

A qualified disability trust is any trust:

Described in 42 U.S.C. 1396p(c)(2)(B)(iv) and established solely for the benefit of an individual under 65 years of age who is disabled, and
All of the beneficiaries of which are determined by the Commissioner of Social Security to have been disabled for some part of the tax year within the meaning of 42 U.S.C. 1382c(a)(3).

A trust will not fail to meet item 2 above just because the trust’s corpus may revert to a person who isn’t disabled after the trust ceases to have any disabled beneficiaries.

All other trusts. A trust not described above is allowed a $100 exemption.