What is the Tax Treatment of Trustee Fees?

 In Revocable Trusts, Trustee

Question:

Does the trustee of an irrevocable trust pay income tax on the fee they charge the trust? Would that fee then be a deduction from trust income?

1040-tax-return-irrevocable-trust-Wellesley-MA

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Response:

Yes on both counts. Fees earned by trustees constitute taxable earned income to the trustee. And payment of trustee fees is an administrative expense that trusts may deduct on their 1041 income tax returns.

Some wording in the 2017 Tax Act put the second issue—deductibility of trustee fees—into question, but the IRS has since confirmed that they continue to be deductible.

 

Related Articles:

How Much are Trustee Fees for a Larger Trust?

When are Trustee Fees Paid?

What is a Standard Trustee Fee?

How are Trusts Taxed?

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