Who has to file Form 1041
- An estate with gross income of $600 or more for the year
- A trust with any taxable income, or gross income of $600 or more
- Any estate or trust with a nonresident alien beneficiary
For calendar-year estates and trusts, Form 1041 is due April 15. Estates can often choose a fiscal year, which can help with timing. Most grantor trusts report income on the grantor's own return instead.
Why trust tax brackets matter
Trusts and estates hit the top 37% federal rate at very low income, above $16,000 of taxable income in 2026, and the 3.8% net investment income tax starts at the same level. Income distributed to beneficiaries is generally taxed to them instead, usually at lower rates, and reported on Schedule K-1. Deciding what to distribute, and when, is one of the most valuable things a fiduciary can plan. Distributions made within 65 days after year-end can even be treated as made in the prior year.
New Jersey and New York
- New Jersey no longer has an estate tax, but it still has an inheritance tax on transfers to certain beneficiaries, such as siblings and non-relatives. Spouses, children and grandchildren are generally exempt.
- New York has its own estate tax, with an exclusion of $7.35 million in 2026 and a "cliff": estates more than 5% over the exclusion lose it entirely.
- Both states require their own fiduciary income tax returns where applicable.
The federal estate tax exclusion is $15 million per person for 2026. We coordinate with your estate attorney on estate tax matters.
What we handle
- The decedent's final individual income tax return
- Form 1041 and state fiduciary returns for each year the estate or trust is open
- Beneficiary Schedule K-1s and distribution planning
- Basis records for inherited assets, which generally receive a step-up to fair market value at death
Frequently asked questions
Does every trust need to file a tax return?
No. Most grantor trusts (including many revocable living trusts during the grantor's life) report income on the grantor's return. Non-grantor trusts generally file Form 1041 if they have any taxable income or gross income of $600 or more.
Who pays the tax on trust income?
The trust pays tax on income it keeps. Income distributed to beneficiaries is generally taxed to them, as reported on their Schedule K-1.
Is there still a New Jersey estate tax?
No, it was repealed for deaths on or after January 1, 2018. New Jersey's inheritance tax still applies to transfers to certain beneficiaries.
What's the cost basis of inherited property?
Generally its fair market value on the date of death, which can eliminate gain that built up during the decedent's life.