Updated November 5, 2026. Quick answer: The State and Local Tax Deduction Worksheet in the Instructions for Form 1041 (2025) is how an estate or trust finds out whether its line 11 Taxes deduction is cut back. It has 8 lines. If your state and local taxes are $10,000 or less you skip it; above that, the $40,000 limit steps down by 30% of the amount your adjusted gross income is over $500,000, and never below $10,000. You keep the worksheet for your records and do not file it.
When an estate or trust uses it
“The maximum deduction for state and local taxes is $40,000.” “This applies to the total of your state and local income taxes (or general sales taxes, if elected instead of income taxes), real estate taxes, and personal property taxes.” “The limitation does not apply to foreign income taxes, and state and local taxes paid or accrued in carrying on a trade or business or for the production of income.”
The instructions tell you where the worksheet comes in: “Complete the State and Local Tax Deduction Worksheet, later, to see if your deduction is limited.” The worksheet itself opens with a threshold: “If the amount of state and local taxes is $10,000 or less, you don’t have to complete the worksheet.” The sheet is marked “Keep for Your Records”, so it stays with the file.
Which taxes count on line 11
The instructions list the deductible taxes for Form 1041 line 11. The ones that matter for line 1 of the worksheet are:
- “State and local income taxes.” “You can deduct state and local income taxes unless you elect to deduct state and local general sales taxes. You can’t deduct both.”
- “State and local real property taxes.”
- “State and local personal property taxes.”
- “Foreign or U.S. territory income taxes.” The instructions add that you may want a credit instead; they point to the Schedule G, Part I, line 2a instructions.
The instructions also list what not to deduct on this line: “Federal income taxes;” “Estate, inheritance, legacy, succession, and gift taxes;” “Federal duties and excise taxes; or” “Foreign real property taxes.”
Where the adjusted gross income on line 2 comes from
An estate or trust does not use an individual’s AGI. The Definitions section says: “Compute the AGI of an estate or a non-grantor trust by subtracting the following from total income on line 9 of page 1.”
- “The administration costs of the estate or trust (the total of lines 12, 14, and 15a to the extent they are costs incurred in the administration of the estate or trust) that wouldn’t have been incurred if the property were not held by the estate or trust.”
- “The income distribution deduction (line 18).”
- “The amount of the exemption (line 21).”
- “The net operating loss deduction (NOLD) claimed on line 15b.”
The eight lines as the IRS prints them
Line 4 is the only fork. The caption and the two printed answers are shown together.
| Line | Caption as printed |
|---|---|
| 1 | “Enter the amount of your state and local taxes. If your state and local taxes are more than $40,000, enter $40,000” |
| 2 | “Enter the estate’s or trust’s adjusted gross income. See instructions” |
| 3 | “Enter $500,000” |
| 4 | “Is the amount on line 2 more than the amount on line 3?” Yes: “Subtract line 3 from line 2” No: “Skip lines 5 through 7 and enter the amount from line 1 on line 8.” |
| 5 | “Multiply line 4 by 30% (0.30)” |
| 6 | “Subtract the amount on line 5 from $40,000” |
| 7 | “Enter the larger of the amount on line 6 or $10,000.” |
| 8 | “State and local tax deduction. Enter the smaller of line 1 or line 7. Include this amount in the entry you make on Form 1041, line 11, Taxes” |
How the lines work together
Line 1 is capped by the instruction in its own caption: if the taxes are more than $40,000 you enter $40,000. Lines 2 and 3 set up the test: your AGI against $500,000. If AGI is not more than $500,000, line 4 sends you straight to line 8, and the deduction is the line 1 amount. If it is more, lines 4 to 7 do the step-down: the excess over $500,000 (line 4), 30% of that excess (line 5), $40,000 less that (line 6), and the larger of that or $10,000 (line 7). Line 8 is then the smaller of your taxes (line 1) and line 7, and it goes on Form 1041 line 11.
Three cases (this page’s own numbers)
The IRS prints no filled-in copy of this worksheet. These cases use only the arithmetic printed on it, with assumed amounts; each result is computed from the printed lines.
| Line | Case A (taxes $25,000, AGI $400,000) | Case B (taxes $30,000, AGI $520,000) | Case C (taxes $50,000, AGI $800,000) |
|---|---|---|---|
| 1 (assumed; used to compute) | $25,000 | $30,000 | $40,000 |
| 2 (assumed; used to compute) | $400,000 | $520,000 | $800,000 |
| 3 (assumed; used to compute) | $500,000 | $500,000 | $500,000 |
| 4 (computed) | skipped | $20,000 | $300,000 |
| 5 (computed) | skipped | $6,000 | $90,000 |
| 6 (computed) | skipped | $34,000 | a negative $50,000 |
| 7 (computed) | skipped | $34,000 | $10,000 |
| 8 (computed) | $25,000 | $30,000 | $10,000 |
Case A: AGI of $400,000 is not more than $500,000, so lines 4 to 7 are skipped and line 8 is the line 1 amount, $25,000 (computed).
Case B: AGI is $20,000 over $500,000. Thirty percent of that is $6,000, so line 6 is $34,000 and line 7 is $34,000. Taxes of $30,000 are below that, so line 8 is $30,000 (computed).
Case C: the taxes are $50,000, so line 1 is $40,000. AGI is $300,000 over $500,000. Thirty percent of that is $90,000, so line 6 is a negative $50,000 and line 7 is the larger of that or $10,000, which is $10,000. Line 8 is $10,000 (computed).
Edition
This page reads the Instructions for Form 1041 (2025), the file irs.gov served on 2026-11-05 (sha256 in the kit data); the worksheet is on printed page 27 and the line 11 text on page 26. The $40,000, $500,000, 30% and $10,000 figures belong to that 2025 edition. Check the label printed on the worksheet in your own copy, and read the instructions for the year you are filing.
Common mistakes
- Completing the worksheet when state and local taxes are $10,000 or less. The worksheet says you don’t have to.
- Using the individual’s AGI on line 2. For an estate or non-grantor trust the instructions compute AGI by subtracting the administration costs, the income distribution deduction, the exemption and any NOL deduction from total income.
- Entering more than $40,000 on line 1. The caption says to enter $40,000 if the taxes are more.
- Deducting federal income taxes, estate or gift taxes, or foreign real property taxes on line 11. The instructions list them as not deductible there.
- Filing the worksheet. It is marked Keep for Your Records.
Related: Form 1041 lines 10 to 12, and the individual SALT limit on Schedule A lines 5d and 5e.
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Answer againSources
- Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025): https://www.irs.gov/pub/irs-pdf/i1041.pdf
- IRS, About Form 1041, U.S. Income Tax Return for Estates and Trusts: https://www.irs.gov/forms-pubs/about-form-1041
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.