2026 tax year
Trust income tax calculator
A trust reaches the 37% bracket at $16,000 of income, which is exactly why trusts distribute it out.
A trust or estate that keeps its income pays tax on it at brutally compressed brackets, the top 37% rate starts at just $16,000 of retained income, versus around $640,000 for an individual. Income it distributes to a beneficiary instead is taxed to that person at their own (usually far lower) rate, via a K-1. This shows the difference on Form 1041.
Interest, dividends, rents, gains.
Enter the trust income and distribution.
Worked example, $60,000 of trust income
A trust earns $60,000. Compare keeping it versus distributing it to a beneficiary who has $25,000 of other income:
| Choice | Tax |
|---|---|
| Trust retains all $60,000 | $20,131 |
| Trust distributes all $60,000 | $8,980 (paid by the beneficiary) |
Kept in the trust, the $60,000 costs $20,131, roughly a 34% effective rate, because it races through the compressed brackets. Distributed to the beneficiary, it costs $8,980 at their individual rate, a saving of $11,151. That gap is the entire reason trusts push income out to beneficiaries each year.
Questions
Why are trust tax brackets so high?
The 2026 trust and estate brackets are 10% to $3,300, 24% to $11,700, 35% to $16,000, and 37% above. So a trust hits the top rate at $16,000 of retained income. The compression is deliberate: it discourages parking income in a trust to avoid the beneficiary's own rate.
How does distributing income lower the tax?
A trust gets a "distribution deduction" for income it pays out, up to its distributable net income. That income is then taxed to the beneficiary on a Schedule K-1 at their individual rate, usually much lower than the trust's. So the same dollars are taxed once, but at a better rate.
What is a grantor trust?
A trust whose income is taxed to the person who created it (the grantor), not to the trust, common with revocable living trusts. There is no separate 1041 tax; it all appears on the grantor's return. This calculator models a non-grantor trust, where the trust is its own taxpayer.
Do estates use the same brackets?
Yes. An estate with income during administration files Form 1041 under the same compressed brackets and the same distribution rules. Estates get a bit more flexibility on the tax year and some deductions, but the retain-versus-distribute math is identical.
Related tools
- Estate tax calculator tax on the estate itself
- Inheritance tax calculator the beneficiary's side
- GST tax calculator skipping a generation
Estimate for the 2026 tax year. Distributable net income and trust type affect the result. Not tax or legal advice.