What is Trust and estate tax rates?
In short
Trusts and estates pay income tax on income they keep, using compressed rate brackets: they reach the top 37% rate at just $15,650 of taxable income for 2025, far sooner than individuals.
Key takeaways
- Distributing income shifts the tax to beneficiaries, who are often in lower brackets.
- The distribution deduction is limited by distributable net income.
- Trusts and estates file Form 1041.
Where it's tested
REG: Trusts, Estates & Gift Tax Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the One Big Beautiful Bill Act, what is the lifetime estate and gift tax exemption per individual beginning in 2026, and is it scheduled to sunset?