Where to include medical deductions on Schedule K-1 Worksheet (Trusts)?

[Michael16]

I received a 1041 grantor letter for income, deductions, and credits for a first party special needs trust for which I'm the fiduciary.

I need to enter the information on a Schedule K-1 worksheet in TurboTax for the beneficiary's taxes (1040). I see fields for income, etc., on the Schedule K-1 worksheet in TurboTax, but where should I enter the medical deductions? Line 9 includes directly apportioned deductions but it doesn't seem medical expenses fit any of the fields.

[RobertB4444 · Accepted solution]

The grantor letter isn't precisely a K1.  It sort of approximates one.  So a lot of the items - the income items as you have already noticed - are easy to enter into a 1041 K1 and get them to go to the precise right locations.  But some of the deductions have to be entered directly into the schedule A where they belong or onto their corresponding forms.  

In the case of medical deductions you would enter those in the deductions and credits section of your federal return just as you would medical deductions for yourself.

[Michael16]

Thanks, this is very helpful.

The Schedule A deductions would reduce the beneficiary's taxable income as an itemized deduction, but since the child is claimed as a dependent on the parents' taxes, taxes are computed via form 8615 (the so-called Kiddie tax) at the parents' rate, rather than through itemized deductions.

I assume there's no way to reduce the income used to calculate taxes on form 8615 from the medical expenses?

[ThomasM125]

No, the only itemized deductions allowed would be those directly associated with the generation of unearned income, as mentioned here in the instructions to Form 8615.