Distribute or Retain? Trust Income Calculator
Is this year's trust income taxed cheaper in the trust or in the beneficiary's hands? Every piece below can be linked to, so it opens in a window on your reader's screen, current as of the record. No form to fill in.
2026 law · Reviewed September 4, 2026 · The full page, with methodology and sources · the terms · All tools
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The trust's income, how much is investment income, and the beneficiary's own income and status in; the tax retained against the tax distributed, the surtax each way, and the saving out. 100% of the distributed income is assumed to be within distributable net income. In a frame it carries no cookies, no tracking, and a visible link back to the methodology. Your site has to allow frames; most do. The link that opens it in a small window is on the professionals page.
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- In plain words.
- A trust that keeps its income pays tax at rates that reach the top bracket at about sixteen thousand dollars. If it pays the income out instead, the trust deducts it and the beneficiary pays tax on it at their own rates, on top of their own income. This tool computes both, including the 3.8 percent surtax on investment income each way, and shows the difference.
- Why it matters.
- The trustee makes this choice every year, and the tax difference is often thousands of dollars. This gives the tax half of the decision; whether the beneficiary should have the money is the other half.
- An example.
- A trust with $50,000 of dividends: keeping it costs about $17,700 in tax and surtax. Paying it to a single beneficiary who has $60,000 of other income costs about $11,100. Distributing saves about $6,600.
- Where it stops.
- It assumes the whole amount can be paid out and taxes it at ordinary rates in both hands; dividends and long-term gains have their own lower rates, and capital gains usually stay in the trust. The trust's fees, state tax, and the reason the trust exists are not in the number.
The facts
Six quotable sentences on where trust income is taxed, 2026 figures.
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- A non-grantor trust reaches the 37 percent bracket at $16,000 of taxable income in 2026; a single person reaches it at $640,600, a couple at $768,700 (Rev. Proc. 2025-32). The 3.8 percent surtax on a trust's retained investment income begins at the same $16,000 (§ 1411(a)(2)).
- Income the trust distributes is deducted by the trust and taxed to the beneficiary instead, up to distributable net income, and keeps its character on the way out (§§ 651, 652, 661, 662). Distributed interest is interest to the beneficiary; distributed dividends are dividends.
- Example: $50,000 of dividends retained costs the trust $17,723 in tax and surtax; distributed to a single beneficiary with $60,000 of other income it costs $11,086. Distributing saves $6,637 this year.
- The surtax follows the income too, but at the beneficiary's threshold, $200,000 single or $250,000 joint of modified adjusted gross income, rather than the trust's $16,000.
- Capital gains are the exception: unless the trust instrument or state law puts them in distributable net income, they stay in the trust and are taxed there, at the trust's compressed thresholds.
- The trustee's decision is not only tax: a distribution leaves the trust's protection and lands in the beneficiary's estate, creditors' reach, and divorce. The 65-day election lets a distribution made by early March count for the prior year (§ 663(b)).
Where each rate begins
The compressed trust brackets beside the individual ones.
The button shows exactly what your reader sees when they click the link. Paste the link where a link goes; it opens this table in a small window, always current as of the record, with the attribution and a link to the full page. Nothing to copy out, nothing to update later.
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| Rate | Trust | Single | Married filing jointly |
|---|---|---|---|
| 10% | $0 | $0 | $0 |
| 12% | — | $12,400 | $24,800 |
| 22% | — | $50,400 | $100,800 |
| 24% | $3,300 | $105,700 | $211,400 |
| 32% | — | $201,775 | $403,550 |
| 35% | $11,700 | $256,225 | $512,450 |
| 37% | $16,000 | $640,600 | $768,700 |
| Surtax 3.8% on investment income above | $16,000 | $200,000 | $250,000 |
Cite and link.
The clean address, a citation generated from the record so it can never carry a stale review date, and an address for every section so you can point a reader at the exact table or method.
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- Link
- https://consideratecapital.com/tools/trust-distribute-or-retain
- Citation
- Considerate Capital, "Distribute or Retain? Trust Income Calculator," reviewed September 4, 2026, https://consideratecapital.com/tools/trust-distribute-or-retain.
Link to a section
- The calculator https://consideratecapital.com/tools/trust-distribute-or-retain#calculator
- The facts https://consideratecapital.com/tools/trust-distribute-or-retain#facts
- Where each rate begins https://consideratecapital.com/tools/trust-distribute-or-retain#key-numbers
- How the choice works https://consideratecapital.com/tools/trust-distribute-or-retain#how-it-works
- Methodology https://consideratecapital.com/tools/trust-distribute-or-retain#methodology
- Sources https://consideratecapital.com/tools/trust-distribute-or-retain#sources
- Revision history https://consideratecapital.com/tools/trust-distribute-or-retain#revision-history
Everything here reads from one reviewed record, so a copied piece carries its year and its review date. When the law moves, the embed updates by itself; a copied table or chart keeps the year in its caption. Corrections are welcome through the contact page.