For the latest information about developments related to Pub. 559, such as legislation enacted after it was published, go to IRS.gov/Pub 559 .

Reminders

Throughout this publication, section references are to the Internal Revenue Code unless otherwise noted.

Medical and dental expense deduction. The threshold for deducting medical and dental expenses remains at amounts exceeding 7.5% of your adjusted gross income (AGI). See the Instructions for Schedule A (Form 1040) for more information.

Beneficiary deductions. Section 67(g) suspends miscellaneous itemized deductions subject to the 2% floor for tax years 2018 through 2025. See Notice 2018–61 PDF for more information about allowable beneficiary deductions under section 67(e) and 642(h). Also see Regulations section 1.67-4 available at IRS.gov/irb/2014-22_IRB/ ar05.html amended at IRS.gov/irb/ 2014-32_IRB/ar06.html for costs that are commonly or customarily incurred by an individual.

Deduction of taxes. The deduction for state and local taxes is limited to $10,000. The deduction for foreign real property taxes is no longer allowed. See the Form 1040 and 1040-SR Instructions and Form 1041 Instructions for more information.

Net operating loss. The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) eliminated the option to carry back a net operating loss (NOL) for most taxpayers. Generally, an NOL generated in a tax year ending after 2017 can only be carried forward to subsequent years. The 2-year carryback rule no longer applies. See Pub. 536, Net Operating Loss for Individuals, Estates, and Trusts, for additional information. Exceptions apply to certain farming losses. See Pub. 225, Farmer's Tax Guide for more information.

Section 965 deferred foreign income. If you own (directly or indirectly) certain foreign corporations, you may have to include on your return certain deferred foreign income. You may pay the entire amount of tax due with respect to this deferred foreign income this year or elect to make payment in eight installments or in the case of certain stock owned through an S corporation, elect to defer payment until occurrence of a triggering event. See the Form 1040 and 1040-SR instructions, and Form 1041 instructions, for more information.

Qualified business income deduction. For tax years beginning after 2017, individuals, estates, and trusts may be entitled to a deduction of up to 20% of their qualified business income from a trade or business. For more information, see section 199A and the Instructions for Forms 8995 or 8995-A.

Form 8990, Limitation on Business Interest Expense Under Section 163(j). For tax years beginning in 2018, taxpayers are required to file Form 8990, unless an exception for filing is met. Small business taxpayers other than a tax shelter, with average annual gross receipts of $26 million or less for the 3 prior tax years are not required to file Form 8990. For more information, see Form 8990 and the Instructions for Form 8990.

Inclusion of Global Intangible Low-Taxed Income (GILTI). Public Law 115-97 enacted new section 951A, which requires U.S. shareholders of controlled foreign corporations to determine and include their GILTI in taxable income every year. Section 951A is effective for tax years of foreign corporations beginning after 2017, and to tax years of U.S. shareholders in which or with which such tax years of foreign corporations end. Use Form 8992 to figure the U.S. shareholder's GILTI and attach it to your income tax return. See section 951A and the Instructions for Form 8992 for more information.

Consistent treatment of estate and trust items. Beneficiaries must generally treat estate items the same way on their individual returns as they are treated on the estate's return.

Consistent basis reporting between estate and person acquiring property from a decedent. Section 2004 of Public Law 114-41 has two major requirements.

An executor of an estate (or other person) required to file an estate tax return after July 31, 2015, must provide a Form 8971 with attached Schedules A to the IRS, and a copy of the beneficiary's Schedule A to each beneficiary who receives or is to receive property from the estate. The Schedule A must show the final estate tax value of the property received or to be received by the beneficiary. An executor (or other person) who files an estate tax return only to make an election regarding the generation-skipping transfer tax or portability of the deceased spousal unused exclusion (DSUE) may not be required to provide Form 8971 and Schedule A. If Part 2, column C of the Schedule A received by the beneficiary indicates that the property increases the estate tax liability, the beneficiary must use a basis consistent with the final estate tax value of the property to determine the beneficiary’s basis in that property. Calculate a basis consistent with the final estate tax value by starting with the reported value and then making any allowed adjustments.

For more information, see the Instructions for Form 8971 and Schedule A and Column (e)—Cost or Other Basis in the Instructions for Form 8949.

Restored exclusion and GST exemption amounts. If a decedent made a taxable gift during the decedent's lifetime to the decedent's same-sex spouse and that transfer resulted in a reduction of the decedent's available applicable exclusion amount, there is a new procedure allowing the decedent to restore the exclusion that was utilized in the transfer. If a decedent made a taxable gift during the decedent's lifetime to a skip person whose generation assignment is changed as a result of Notice 2017-15, any GST exemption amount allocated to the gift will be deemed void. For more information, see the Instructions for Form 706 and Notice 2017-15, 2017-06 I.R.B. 783.

Extension for executors filing to elect portability. Executors who didn't have a filing requirement under section 6018(a), but failed to timely file Form 706 to make the portability election, may be eligible for an extension under Rev. Proc. 2017-34, 2017-26 I.R.B. 1282. Executors filing to elect portability, may now file Form 706 on or before the later of January 2, 2018 or the second anniversary of the decedent's death. For more information see Rev. Proc. 2017-34.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.