Non-grantor trusts and estates pay tax on retained income using dramatically compressed brackets compared to individuals.
How it works
Retained taxable income is taxed progressively across trust-specific brackets, the same bracket-by-bracket method this site’s income-tax-bracket calculator uses for individuals, but applied to trust thresholds instead.
What this does not include
This computes tax on income the trust retains — income actually distributed to beneficiaries generally passes through and is taxed at the beneficiary’s own individual rate instead, a distinction this calculator’s retained-income focus doesn’t cover.
How to use this calculator
- Enter the trust’s retained taxable income.
Frequently asked questions
Why are trust tax brackets so much more compressed than individual brackets?
Trust brackets were designed to discourage using trusts purely to shelter income from higher individual tax rates by taxing retained trust income steeply once it exceeds a modest amount.
Does this apply to a revocable living trust?
No — a revocable living trust is typically a “grantor trust,” meaning its income is reported directly on the grantor’s own individual tax return, not taxed separately using these trust brackets.
How can a trustee reduce a trust’s tax bill?
Distributing income to beneficiaries (who are then taxed at their own, often lower, individual rates) rather than retaining it inside the trust is a common strategy to avoid the compressed trust brackets.
