Use Nongrantor Trusts to Bypass the SALT Deduction Limit

Nongrantor trusts may ease the tax bite of the $10,000 federal limit on state and local (SALT) deductions. A nongrantor trust is a discrete legal entity that files its own tax returns and claims its own deductions. The idea behind the strategy is to divide real estate that’s subject to more than $10,000 in property taxes among several trusts, each of which enjoys its own SALT deduction up to $10,000. Each trust must generate sufficient income against which to offset the deduction. Be aware that multiple trusts may be treated as a single trust if they have “substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries.” Contact us to learn more.