Not all states treat trust income tax the same.

If you set up an irrevocable trust that can or must retain income, be careful which state you set the trust up in.  Generally the IRS levies a heavy tax on trust income that is not distributed.  In fact in 2016, if the net taxable trust income retained in the trust exceeds $12,400 then the excess is taxed at a rate of 39.6%.  But that is not all.  Many states also impose a state income tax on trust income in addition to the federal tax (although the state income tax paid is generally a deduction on the federal tax return).

 

For example, if your trust is located in New York, then trust net income is taxed as the following rates:

$0 ..................... $8,400 ............... 4% of amount on line 5
$8,400 .............. $11,600 ............. $336 plus 4.5% of amount over $8,400
$11,600 ............ $13,750 ............. $480 plus 5.25% of amount over $11,600
$13,750 ............ $21,150 ............. $593 plus 5.9% of amount over $13,750
$21,150 ............ $79,600 ............. $1,029 plus 6.45% of amount over $21,150
$79,600 ............ $212,500 ........... $4,800 plus 6.65% of amount over $79,600
$212,500 .......... $1,062,650 ........ $13,637 plus 6.85% of amount over $212,500
$1,062,650 ................................... $71,873 plus 8.82% of amount over $1,062,650 

Florida does not impose a state income tax on trusts and estates.  For more information, contact Florida Bar Board Certified attorney Matthew A. Linde today at 239.939.7100!

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