Property Tax Rates, Trusts, and Reporting Rules for 2022

Income Tax Return for Estates and Trusts

Estates and trusts that generate income during the year are subject to the tax rates set by the federal government. They must file an income tax return for estates and trusts with the Internal Revenue Service (IRS), which is the income tax return for estates and trusts in the United States. Tax brackets are adjusted annually to account for inflation, just as personal income tax brackets are adjusted.

Estates and Trusts Required to File a Tax Return

Estates that generate a gross income exceeding $600 in the tax year and those that have any non-resident beneficiary are required to file an income tax return for estates. Similarly, trusts that generate any taxable income, or have a gross income exceeding $600 regardless of taxable income, or have any non-resident beneficiary are required to file an income tax return for trusts.

Income Tax Brackets for Estates and Trusts

Below are the tax rates and income brackets applicable to estates and trusts opened for deaths that occurred in 2022 and apply to the tax return filed in 2023:

• Income bracket: $0 to $2,750 – Tax rate: 10% on income over $0
• Income bracket: $2,750 to $9,850 – Tax rate: $275 + 24% on income over $2,750
• Income bracket: $9,850 to $13,450 – Tax rate: $1,979 + 35% on income over $9,850
• Income bracket: $13,450 or more – Tax rate: $3,239 + 37% on income over $13,450

Income Taxes Are Not the Same as Property Taxes

The rates and brackets for income tax should not be confused with property tax limits and available exemptions. The tax rates and brackets apply only to the income earned by estates and trusts before the assets are transferred to the beneficiaries. Property tax applies to the total value of the estate and requires filing an estate tax return with the Internal Revenue Service (IRS).

Frequently Asked Questions (FAQs)

What is the difference between a trust and an estate?

A trust is a type of relationship or arrangement where a third party holds title to property or assets on behalf of a beneficiary. Trusts can be created under state law. Typically, trusts avoid the probate process. An estate is the term used to describe a person’s belongings after their death. An estate may include the person’s home, assets, personal effects, and more.

What is the highest trust and estate tax rate?

The highest trust and estate tax rate is 37%. It applies to income exceeding $13,450 for deaths occurring in 2022. The tax rate is $3,146 plus 37% of the income over $13,450. IRS Form 1041 provides instructions on how to file the return.

Source: https://www.thebalancemoney.com/2020-income-tax-brackets-estates-and-trusts-3504855