The Effect of the TCJA on Trusts and Estates

Much has been published in recent months regarding the effects of the Tax Cut and Jobs Act of 2017 on individual, corporate and pass-through entities, but there are significant changes for Estates and Trusts as well.

First, the tax brackets were expanded and the rates changed for trusts.  Secondly, the estate tax deduction was significantly increased.  Additionally, the dreaded Qualified Business Income (QBI) deduction also affects trusts with business income.

The table below shows the comparative tax rates and brackets for trusts and estates:

2017 Tax Rates

2017 Tax Brackets

2018 Tax Rates

2018 Tax Brackets


Up to $2,550


Up to $2,550


$2,551 - $6,000


$2,551 - $9,150


$6,001 - $9,150


$9,151 - $12,500


$9,151 - $12,500


Over $12,500


Over $12,500



In somewhat of a surprise, Congress more than doubled the estate tax deduction, also known as the death tax from $5,490,000 to $11,180,000.  The change is temporary, as are the individual tax changes and will expire in 2025.  This gives wealthy individuals a chance to update estate tax plans to take advantage of the higher deduction.  Charitable or Credit Shelter Trust documents may also need to be updated to reflect the changes.

The annual exclusion for lifetime gifts, which do not count against the estate tax deduction has been increased from $14,000 to $15,000 per recipient and $30,000 per recipient for married couple filing joint returns.

Finally, the QBI deduction (also referred to as the 199A deduction), which has received much attention for pass-through entities such as Partnerships and S Corporations, also affects estates and trusts with qualified income.  Trusts with income from a qualified trade or business, may deduct 20% of the income subject to certain limitations.  It appears that rental property income will qualify under the proposed regulations published by the Treasury in August.  These proposed regulations will likely change somewhat prior to finalization, so check back for updates.