#FIFTY NIFTY UNITED STATES FULL#

Source income generally does not include portfolio income such as interest, dividends, and gains on intangible property. Examples include income generated from tangible personal property or real property located within the state or an operating business with activity occurring in the state. Generally, source income is income attributable to specific assets or business activities occurring in a state.

The definition of source income will vary from state to state under the applicable statutes.

States subject nonresident trusts to taxation on income sourced to that specific state. With respect to identifying differences between federal and state taxation, of note, Massachusetts does not follow the federal 65 day election under IRC § 663(b). Vermont does not require trusts to make estimated tax payments. Rhode Island requires estimated tax payments equal to the smaller of 100% of current year tax or 100% of prior year tax. Estimated tax payments must be remitted electronically if net taxable income is $50,000 or more. Massachusetts requires estimated tax based on the current year taxable income.

#FIFTY NIFTY UNITED STATES FULL#

Maine requires estimated tax payments equal to 90% of the current year tax or 100% of the prior year tax if the prior year included a full twelve month period. Exceptions to the estimated tax obligation include a trust that was a full year resident for the prior year but did not file because it had a zero Connecticut tax liability and a nonresident trust that had prior year Connecticut source income but did not file because it had a zero Connecticut tax liability. In the initial year of filing, the trust must remit 90% of its current year tax to avoid underestimated tax penalties. For instance, Connecticut requires estimated tax payments equal to 90% of the current year tax or 100% of the prior year tax if the prior year included a full twelve month period. Most states determine the taxable amount by starting with the federal taxable amount and then making certain adjustments.Įstimated tax payments, too, come with distinct rules. In addition, each state provides its own definitions of modifications to arrive at taxable income, deductions, and credits. While a state by state review of the specific rules is beyond the scope of this article, one must understand the importance of identifying the connections a trust has to a particular state (or multiple states) and the unique rules that each state may employ for subjecting a trust to income taxation. The basis for taxation as a resident trust differs in each state. New Hampshire no longer taxes interest and dividends earned by non-grantor trusts though it does still have an entity level tax on business activities engaged in by the trust.

Compliance issues: New England StatesĪll of the New England states other than New Hampshire have a broad based income taxation regime of trusts.

Researching and understanding the tax laws of each state with a possible connection to the trust is essential to providing complete and accurate tax return compliance. Thus, state income taxation of trusts is an area with an overabundance of rules at play. (Originally presented at New Hampshire’s 32nd Annual Tax Forum in November 2014)įorty-two states and the District of Columbia impose an income tax on resident trusts as well as state-sourced income of nonresident trusts. By Jean McDevitt Bullens FebruState Income Taxation of Trusts

Fifty nifty united states