Title 26 — Internal Revenue CodeRelease 119-73
§642 Special rules for credits and deductions
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter J— - Estates, Trusts, Beneficiaries, and Decedents › Part PART I— - ESTATES, TRUSTS, AND BENEFICIARIES › Subpart Subpart A— - General Rules for Taxation of Estates and Trusts › § 642
Summary
Let estates and trusts claim certain tax credits and deductions, but only in the special ways the law sets out. An estate or trust can take a foreign tax credit like individuals do, but only for the part of those foreign taxes that are not properly owed by the beneficiaries. Estates get a standard deduction of $600. Most trusts get $100. A trust that must pay out all its income now gets $300. A “qualified disability trust” gets a deduction equal to the personal exemption amount in section 151(d). A qualified disability trust is a disability trust under Social Security law whose beneficiaries were found disabled for part of the year. If the section 151(d) exemption is zero for a year, the law uses $4,150 instead, and that $4,150 is increased after 2018 the same way a specific inflation rule increases amounts under section 6334(d)(4)(C). These deductions replace the personal exemption rules in section 151. Estates and most trusts can also deduct any part of their gross income that they pay to charity for the purposes listed in section 170. Trustees may choose to treat a charitable gift made up to one year after the tax year as if it were made in the earlier year, if they follow the IRS rules. Special rules apply for pooled income funds, certain older trusts or trusts created by wills before October 10, 1969, private foundations, net operating loss deductions, depreciation, depletion, and amortization. Amounts already claimed as estate tax deductions under sections 2053 or 2054 cannot be deducted again on the estate’s income tax return unless a written statement and waiver are filed as the IRS requires. There are also rules for when an estate or trust ends and it has loss carryovers or deductions that exceed income, and special rules for cemetery perpetual care funds treated as trusts.
Full Legal Text
Title 26, §642
Internal Revenue Code — Source: USLM XML via OLRC
(a)An estate or trust shall be allowed the credit against tax for taxes imposed by foreign countries and possessions of the United States, to the extent allowed by section 901, only in respect of so much of the taxes described in such section as is not properly allocable under such section to the beneficiaries.
(b)(1)An estate shall be allowed a deduction of $600.
(2)(A)Except as otherwise provided in this paragraph, a trust shall be allowed a deduction of $100.
(B)A trust which, under its governing instrument, is required to distribute all of its income currently shall be allowed a deduction of $300.
(C)(i)A qualified disability trust shall be allowed a deduction equal to the exemption amount under section 151(d), determined—
(I)by treating such trust as an individual described in section 68(b)(1)(C),11 See References in Text note below. and
(II)by applying section 67(e) (without the reference to section 642(b)) for purposes of determining the adjusted gross income of the trust.
(ii)For purposes of clause (i), the term “qualified disability trust” means any trust if—
(I)such trust is a disability trust described in subsection (c)(2)(B)(iv) of section 1917 of the Social Security Act (42 U.S.C. 1396p), and
(II)all of the beneficiaries of the trust as of the close of the taxable year are determined by the Commissioner of Social Security to have been disabled (within the meaning of section 1614(a)(3) of the Social Security Act, 42 U.S.C. 1382c(a)(3)) for some portion of such year.
(iii)(I)In the case of any taxable year in which the exemption amount under section 151(d) is zero, clause (i) shall be applied by substituting “$4,150” for “the exemption amount under section 151(d)”.
(II)In the case of any taxable year beginning in a calendar year after 2018, the $4,150 amount in subparagraph (A) shall be increased in the same manner as provided in section 6334(d)(4)(C).
(3)The deductions allowed by this subsection shall be in lieu of the deductions allowed under section 151 (relating to deduction for personal exemption).
(c)(1)In the case of an estate or trust (other than a trust meeting the specifications of subpart B), there shall be allowed as a deduction in computing its taxable income (in lieu of the deduction allowed by section 170(a), relating to deduction for charitable, etc., contributions and gifts) any amount of the gross income, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, paid for a purpose specified in section 170(c) (determined without regard to section 170(c)(2)(A)). If a charitable contribution is paid after the close of such taxable year and on or before the last day of the year following the close of such taxable year, then the trustee or administrator may elect to treat such contribution as paid during such taxable year. The election shall be made at such time and in such manner as the Secretary prescribes by regulations.
(2)In the case of an estate, and in the case of a trust (other than a trust meeting the specifications of subpart B) required by the terms of its governing instrument to set aside amounts which was—
(A)created on or before October 9, 1969, if—
(i)an irrevocable remainder interest is transferred to or for the use of an organization described in section 170(c), or
(ii)the grantor is at all times after October 9, 1969, under a mental disability to change the terms of the trust; or
(B)established by a will executed on or before October 9, 1969, if—
(i)the testator dies before October 9, 1972, without having republished the will after October 9, 1969, by codicil or otherwise,
(ii)the testator at no time after October 9, 1969, had the right to change the portions of the will which pertain to the trust, or
(iii)the will is not republished by codicil or otherwise before October 9, 1972, and the testator is on such date and at all times thereafter under a mental disability to republish the will by codicil or otherwise,
(3)In the case of a pooled income fund (as defined in paragraph (5)), there shall also be allowed as a deduction in computing its taxable income any amount of the gross income attributable to gain from the sale of a capital asset held for more than 1 year, without limitation, which pursuant to the terms of the governing instrument is, during the taxable year, permanently set aside for a purpose specified in section 170(c).
(4)To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain described in section 1202(a), proper adjustment shall be made for any exclusion allowable to the estate or trust under section 1202. In the case of a trust, the deduction allowed by this subsection shall be subject to section 681 (relating to unrelated business income).
(5)For purposes of paragraph (3), a pooled income fund is a trust—
(A)to which each donor transfers property, contributing an irrevocable remainder interest in such property to or for the use of an organization described in section 170(b)(1)(A) (other than in clauses (vii) or (viii)), and retaining an income interest for the life of one or more beneficiaries (living at the time of such transfer),
(B)in which the property transferred by each donor is commingled with property transferred by other donors who have made or make similar transfers,
(C)which cannot have investments in securities which are exempt from the taxes imposed by this subtitle,
(D)which includes only amounts received from transfers which meet the requirements of this paragraph,
(E)which is maintained by the organization to which the remainder interest is contributed and of which no donor or beneficiary of an income interest is a trustee, and
(F)from which each beneficiary of an income interest receives income, for each year for which he is entitled to receive the income interest referred to in subparagraph (A), determined by the rate of return earned by the trust for such year.
(6)In the case of a private foundation which is not exempt from taxation under section 501(a) for the taxable year, the provisions of this subsection shall not apply and the provisions of section 170 shall apply.
(d)The benefit of the deduction for net operating losses provided by section 172 shall be allowed to estates and trusts under regulations prescribed by the Secretary.
(e)An estate or trust shall be allowed the deduction for depreciation and depletion only to the extent not allowable to beneficiaries under section 167(d) and 611(b).
(f)The benefit of the deductions for amortization provided by section 169 and 197 shall be allowed to estates and trusts in the same manner as in the case of an individual. The allowable deduction shall be apportioned between the income beneficiaries and the fiduciary under regulations prescribed by the Secretary.
(g)Amounts allowable under section 2053 or 2054 as a deduction in computing the taxable estate of a decedent shall not be allowed as a deduction (or as an offset against the sales price of property in determining gain or loss) in computing the taxable income of the estate or of any other person, unless there is filed, within the time and in the manner and form prescribed by the Secretary, a statement that the amounts have not been allowed as deductions under section 2053 or 2054 and a waiver of the right to have such amounts allowed at any time as deductions under section 2053 or 2054. Rules similar to the rules of the preceding sentence shall apply to amounts which may be taken into account under section 2621(a)(2) or 2622(b). This subsection shall not apply with respect to deductions allowed under part II (relating to income in respect of decedents).
(h)If on the termination of an estate or trust, the estate or trust has—
(1)a net operating loss carryover under section 172 or a capital loss carryover under section 1212, or
(2)for the last taxable year of the estate or trust deductions (other than the deductions allowed under subsections (b) or (c)) in excess of gross income for such year,
(i)In the case of a cemetery perpetual care fund which—
(1)was created pursuant to local law by a taxable cemetery corporation for the care and maintenance of cemetery property, and
(2)is treated for the taxable year as a trust for purposes of this subchapter,
Legislative History
Notes & Related Subsidiaries
Inflation Adjusted Items for Certain YearsFor inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.
Editorial Notes
References in Text
section 68(b)(1)(C), referred to in subsec. (b)(2)(C)(i)(I), which defined applicable amount for an individual who is not married and who is not a surviving spouse or head of household, was omitted in the general amendment of section 68 of this title by Pub. L. 119–21, title VII, § 70111(a), July 4, 2025, 139 Stat. 164. The new subsec. (b) of section 68 of this title does not contain any paragraphs and does not define applicable amount.
Amendments
2018—Subsec. (c)(1). Pub. L. 115–141 substituted “other than” for “other then”. 2017—Subsec. (b)(2)(C)(iii). Pub. L. 115–97 added cl. (iii). 2014—Subsec. (b)(2)(C)(i)(I). Pub. L. 113–295 substituted “section 68(b)(1)(C)” for “section 151(d)(3)(C)(iii)”. 2002—Subsec. (b). Pub. L. 107–134 reenacted heading without change and amended text of subsec. (b) generally. Prior to amendment, text read as follows: “An estate shall be allowed a deduction of $600. A trust which, under its governing instrument, is required to distribute all of its income currently shall be allowed a deduction of $300. All other trusts shall be allowed a deduction of $100. The deductions allowed by this subsection shall be in lieu of the deductions allowed under section 151 (relating to deduction for personal exemption).” 1996—Subsec. (g). Pub. L. 104–188 substituted “under section 2621(a)(2)” for “under 2621(a)(2)”. 1993—Subsec. (c)(4). Pub. L. 103–66, § 13113(d)(2), amended heading and text of par. (4) generally. Prior to amendment, text read as follows: “In the case of a trust, the deduction allowed by this subsection shall be subject to section 681 (relating to unrelated business income).” Subsec. (f). Pub. L. 103–66, § 13261(f)(2), substituted “section 169 and 197” for “section 169”. 1990—Subsec. (e). Pub. L. 101–508, § 11812(b)(9), substituted “167(d)” for “167(h)”. Subsec. (f). Pub. L. 101–508, § 11801(c)(6)(B), substituted “section 169” for “section 169, 184, 187, and 188”. 1989—Subsec. (g). Pub. L. 101–239 inserted after first sentence “Rules similar to the rules of the preceding sentence shall apply to amounts which may be taken into account under 2621(a)(2) or 2622(b).” 1986—Subsec. (a). Pub. L. 99–514, § 112(b)(2), amended subsec. (a) generally, substituting “Foreign tax credit allowed” for “Credits against tax” in heading, striking out designation and heading for par. (1), and striking out par. (2) which read as follows: “An estate or trust shall not be allowed the credit against tax for political contributions provided by section 24.” Subsec. (c)(4). Pub. L. 99–514, § 301(b)(6), in heading, substituted “Coordination with section 681” for “Adjustments”, and in text struck out first sentence which read as follows: “To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain from the sale or exchange of capital assets held for more than 6 months, proper adjustment shall be made for any deduction allowable to the estate or trust under section 1202 (relating to deduction for excess of capital gains over capital losses).” Subsec. (j). Pub. L. 99–514, § 612(b)(3), struck out subsec. (j) which provided a cross reference to section 116(c)(3). 1984—Subsec. (a)(2). Pub. L. 98–369, § 474(r)(17), substituted “section 24” for “section 41”. Subsec. (c)(3), (4). Pub. L. 98–369, § 1001(b)(8), (e), substituted “6 months” for “1 year”, applicable to property acquired after June 22, 1984, and before Jan. 1, 1988. See
Effective Date
of 1984 Amendment note below. 1981—Subsec. (f). Pub. L. 97–34 substituted “and 188” for “188, and 191”. 1978—Subsecs. (i) to (k). Pub. L. 95–600 redesignated subsecs. (j) and (k) as (i) and (j), respectively. Former subsec. (i), which did not allow estates or trusts the deduction for contributions to candidates for public office provided by section 218, was struck out. 1977—Subsec. (k). Pub. L. 95–30 struck out par. (1) which made a cross reference to section 142(b)(4) for disallowance of the standard deduction in the case of estates and trusts and struck out “(2)” at beginning of single remaining cross reference. 1976—Subsec. (a). Pub. L. 94–455, § 1901(b)(1)(H)(i), redesignated former pars. (2) and (3) as (1) and (2), respectively. Former par. (1), relating to the credit against tax for partially tax-exempt interest, was struck out. Subsec. (c)(1). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsec. (c)(3), (4). Pub. L. 94–455, § 1402(b)(2), provided that “9 months” would be changed to “1 year”. Subsec. (c)(3), (4). Pub. L. 94–455, § 1402(b)(1)(J), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977. Subsecs. (c)(5), (d). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsec. (f). Pub. L. 94–455, §§ 1906(b)(13)(A), 1951(c)(2)(B), 2124(a)(3)(B), substituted “section 169, 184, 187, 188, and 191” for “section 168, 169, 184, 187, and 188”, and struck out “or his delegate” after “Secretary”. Subsec. (g). Pub. L. 94–455, §§ 1906(b)(13)(A), 2009(d), inserted “(or as an offset against the sales price of property in determining gain or loss)” after “shall not be allowed as a deduction”, and struck out “or his delegate” after “Secretary”. Subsec. (h). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsecs. (j), (k). Pub. L. 94–528 added subsec. (j) and redesignated former subsec. (j) as (k). 1971—Subsec. (a)(3). Pub. L. 92–178, § 701(b), added par. (3). Subsec. (f). Pub. L. 92–178, § 303(c)(4), inserted reference to section 188. Subsecs. (i), (j). Pub. L. 92–178, § 702(b), added subsec. (i) and redesignated former subsec. (i) as (j). 1969—Subsec. (c). Pub. L. 91–172, § 201(b), designated existing provisions, with minor changes, as par. (1) and added pars. (2) to (6). Subsec. (f). Pub. L. 91–172, § 704(b)(2), struck out reference to emergency or grain storage facilities both in heading and in text, and inserted reference to section 184 and 187 in text. 1966—Subsec. (g). Pub. L. 89–621 inserted “or of any other person” after “shall not be allowed as a deduction in computing the taxable income of the estate”. 1964—Subsec. (a)(3). Pub. L. 88–272, § 201(d)(6)(A), struck out par. (3) which related to dividends received by individuals. Subsec. (i). Pub. L. 88–272, § 201(d)(6)(B), designated existing provisions as par. (1) and added par. (2). 1962—Subsec. (e). Pub. L. 87–834 substituted a reference to section 167(h) for a reference to section 167(g).
Statutory Notes and Related Subsidiaries
Effective Date
of 2017 AmendmentAmendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11041(f)(1) of Pub. L. 115–97, set out as a note under section 151 of this title.
Effective Date
of 2014 AmendmentAmendment by Pub. L. 113–295 effective as if included in the provision of the American Taxpayer Relief Act of 2012, Pub. L. 112–240, to which such amendment relates, see section 202(f) of Pub. L. 113–295, set out as a note under section 55 of this title.
Effective Date
of 2002 Amendment Pub. L. 107–134, title I, § 116(b), Jan. 23, 2002, 115 Stat. 2440, provided that: “The amendment made by this section [amending this section] shall apply to taxable years ending on or after September 11, 2001.”
Effective Date
of 1993 AmendmentAmendment by section 13113(d)(2) of Pub. L. 103–66 applicable to stock issued after Aug. 10, 1993, see section 13113(e) of Pub. L. 103–66, set out as a note under section 53 of this title. Amendment by section 13261(f)(2) of Pub. L. 103–66 applicable, except as otherwise provided, with respect to property acquired after Aug. 10, 1993, see section 13261(g) of Pub. L. 103–66, set out as an
Effective Date
note under section 197 of this title.
Effective Date
of 1990 AmendmentAmendment by section 11812(b)(9) of Pub. L. 101–508 applicable to property placed in service after Nov. 5, 1990, but not applicable to any property to which section 168 of this title does not apply by reason of subsec. (f)(5) of section 168, and not applicable to rehabilitation expenditures described in section 252(f)(5) of Pub. L. 99–514, see section 11812(c) of Pub. L. 101–508, set out as a note under section 42 of this title.
Effective Date
of 1989 AmendmentAmendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.
Effective Date
of 1986 AmendmentAmendment by section 112(b)(2) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title. Amendment by section 301(b)(6) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 301(c) of Pub. L. 99–514, set out as a note under section 62 of this title. Amendment by section 612(b)(3) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 612(c) of Pub. L. 99–514, set out as a note under section 301 of this title.
Effective Date
of 1984 AmendmentAmendment by section 474(r)(17) of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title. Amendment by section 1001(b)(8) of Pub. L. 98–369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98–369, set out as a note under section 166 of this title.
Effective Date
of 1981 AmendmentAmendment by Pub. L. 97–34 applicable to expenditures incurred after Dec. 31, 1981, in taxable years ending after such date, see section 212(e) of Pub. L. 97–34, set out as a note under section 46 of this title.
Effective Date
of 1978 Amendment Pub. L. 95–600, title I, § 113(d), Nov. 6, 1978, 92 Stat. 2778, provided that: “The
Amendments
made by this section [amending this section and section 24 of this title and repealing section 218 of this title] shall apply with respect to contributions the payment of which is made after December 31, 1978, in taxable years beginning after such date.”
Effective Date
of 1977 AmendmentAmendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.
Effective Date
of 1976 Amendment Pub. L. 94–455, title XIV, § 1402(b)(1), Oct. 4, 1976, 90 Stat. 1731, provided that the amendment made by that section is effective with respect to taxable years beginning in 1977. Pub. L. 94–455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977. Amendment by section 1901(b)(1)(H)(i) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. Amendment by section 1951(c)(2)(B) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1952(d) of Pub. L. 94–455, set out as a note under section 72 of this title. Pub. L. 94–455, title XX, § 2009(e)(4), Oct. 4, 1976, 90 Stat. 1896, provided that: “The amendment made by subsection (d) [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 4, 1976].” Pub. L. 94–455, title XXI, § 2124(a)(4), Oct. 4, 1976, 90 Stat. 1918, provided that: “The
Amendments
made by this subsection [enacting section 191 of this title and amending this section and section 1082, 1245, and 1250 of this title] shall apply with respect to additions to capital account made after
June 14, 1976 and before
June 15, 1981.” Pub. L. 94–528, § 1(b), Oct. 17, 1976, 90 Stat. 2483, provided that: “The
Amendments
made by subsection (a) [amending this section] shall take effect on
October 1, 1977, and shall apply to amounts distributed during taxable years ending after
December 31, 1963.”
Effective Date
of 1971 Amendment Pub. L. 92–178, title III, § 303(d), Dec. 10, 1971, 85 Stat. 522, provided that: “The
Amendments
made by this section [enacting section 188 of this title and amending this section and section 57, 1082, 1245, and 1250 of this title] shall apply to taxable years ending after December 31, 1971.” Pub. L. 92–178, title VII, § 703, Dec. 10, 1971, 85 Stat. 562, provided that: “The
Amendments
made by this title [enacting section 24 and 218 of this title and amending this section] shall apply to taxable years ending after December 31, 1971, but only with respect to political contributions, payment of which is made after such date.”
Effective Date
of 1969 AmendmentAmendment by section 201(b) of Pub. L. 91–172 applicable with respect to amounts paid, permanently set aside, or to be used for a charitable purpose in taxable years beginning after Dec. 31, 1969, except that subsec. (c)(5) applicable to transfers in trust made after July 31, 1969, see section 201(g) of Pub. L. 91–172, set out as a note under section 170 of this title. Amendment by section 704(b)(2) of Pub. L. 91–172 applicable to taxable years ending after Dec. 31, 1968, see section 704(c) of Pub. L. 91–172, set out as an
Effective Date
note under section 169 of this title.
Effective Date
of 1966 Amendment Pub. L. 89–621, § 2(b), Oct. 4, 1966, 80 Stat. 873, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Oct. 4, 1966], but only with respect to amounts paid or incurred, and losses sustained, after such date.”
Effective Date
of 1964 AmendmentAmendment by Pub. L. 88–272 applicable to dividends received after December 31, 1964, in taxable years ending after such date, see section 201(e) of Pub. L. 88–272, set out as a note under section 22 of this title.
Effective Date
of 1962 AmendmentAmendment by Pub. L. 87–834 applicable to taxable years beginning after Dec. 31, 1961, and ending after Oct. 16, 1962, see section 13(g) of Pub. L. 87–834, set out as an
Effective Date
note under section 1245 of this title.
Savings Provision
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 642
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73