Are Estate Planning Fees Tax Deductible in Maryland?
Photo by Nataliya Vaitkevich
It’s everyone’s favorite season again: tax season. As you look for ways to reduce your tax burden or maximize your refund, you may have heard that legal fees can often be deducted from your personal or business income.
When it comes to estate planning, understanding the financial implications, including tax deductions, is crucial for Maryland residents. One common question is whether the fees paid for estate planning services are tax-deductible. This guide will walk you through how estate planning fees work and whether you can deduct them on this year’s taxes.
What are Estate Planning Fees?
Estate planning fees are the fees your attorney charges for a range of services related to setting up your estate, including drafting wills, setting up trusts, powers of attorney, and healthcare directives.
Are Estate Planning Fees Tax Deductible?
Generally, the IRS allows for the deduction of legal fees directly related to producing or collecting taxable income or managing, conserving, or maintaining income-producing property.
Prior to 2018, estate planning fees were tax deductible from your Federal income tax. However, because of the Tax Cuts and Jobs Act of 2017, estate planning fees are no longer tax deductible.
This decision is up for renewal in 2025, but until then, individuals can no longer deduct estate planning fees from their taxable income.
Are There Any Tax Benefits in Estate Planning?
Yes! While your legal fees may no longer be tax deductible, there are several ways a comprehensive estate plan can save you money on taxes.
Trusts are one of the most popular documents to include in estate planning that have added tax benefits.
Irrevocable trusts can help you reduce your estate taxes by transferring ownership of the assets to the trust instead of the estate owner.
If you want to structure your estate plan to reduce your tax burden, it’s best to work with a skilled attorney and financial advisors. They can look at the full landscape of your estate and advise you on the best combination of legal products to protect your assets and secure your financial future.
What is the Maryland Estate Tax Limit?
As of 2024, Maryland’s estate tax exemption is $5 million for an individual and $10 million for a couple. This means that you will not owe estate taxes in Maryland unless the value of your estate exceeds these limits.
Why Working With Professionals is Critical
Given the complexity of tax laws and their frequent changes, consulting with a tax professional or an estate planning attorney is highly advisable for anyone looking to maximize their estate planning benefits. They can offer personalized advice based on your specific situation and help you navigate the deductions that may be available to you, both on the federal and state levels.
An estate planning attorney can also ensure that you have the correct mixture of documents to secure every aspect of your family’s future, not just reduce your tax burden.
If you’re ready to create a comprehensive plan to secure your legacy, contact our Maryland estate planning office today at (301) 456-0982 for a FREE consultation with our expert estate planning attorney. Our goal is to create a customized estate plan that fits your unique needs and budget so you can experience the peace of mind that comes from knowing your family’s future is secure for both today and tomorrow.
Conclusion
While the general rule is that estate planning fees are not tax-deductible for individuals, there are other tax benefits a professionally created estate plan can offer. As tax laws evolve, staying informed and seeking professional guidance is key to maximizing the financial efficiency of your estate planning strategy.
Remember, effective estate planning is not just about preparing for the future; it's also about managing the present in the most financially savvy way possible.