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| William Delaney, EA Westwood, MA |
Oh, those are miscellaneous itemized deductions and we lost them on form 1040,
Schedule A as a result of the 2017 Tax Law. Well, as it turns out, that isn’t quite so.
They are alive and well and better than ever!
When correctly preparing a final form 1041, excess deductions (meaning deductions
which exceeded income but did not create a business Net Operating Loss (NOL) should
carry-over to Schedule K-1, box #11 (code A). When preparing the beneficiary’s
personal 1040 return, this was a misc. itemized deduction on Schedule A, subject ti the
2% floor. These deductions were repealed by TCJA 2017. It was believed that the
1040 excess deductions carryover was lost to beneficiaries, but there was some
conflicting information on this. Even so, the deduction was subject to the 2% floor and
might not survive at all if the new standard deduction was larger than your total
allowable Schedule A deductions.
The IRS to the rescue. For tax year 2020, any deductions which fall under IRC Sec.
67e) [excess deductions] should transfer to Schedule 1, line 22 [which is the TOTAL
line]. Drake inserts the description: ED67(e). What happens now? The full amount
(not subject to a 2% adjustment) appears on form 1040, line 10a. This gives us the full
allowable standard deduction + the full excess deductions allowance. As our late friend
and Chapter Vice President Marty Heffan was fond of saying---what’s not to love!
My thanks to a valued colleague, Ellen Briscoe, EA, who practices in NM, for telling me
about this.
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