12/27/2023 0 Comments New york state tax brackets![]() And finally, the third requirement is that the trust cannot have any New York source income. The second requirement is that all of the trust property must be located outside of New York. The first requirement is that all of the trustees (and persons who have influence on the trustees) be located outside of New York State. Exempt status applies only if the trust fulfills three distinct requirements. ![]() If a resident trust receives “exempt” status, then it will be exempt from taxation on all of its income. However, if it is a nonresident trust, only its New York source income is subject to state tax. If a trust is a resident trust, then it is subject to tax in New York State on all of its income. If a given trust is taxed separately from its other associated persons, the next important task is to determine which of the following three categories it falls into: resident, nonresident or exempt. Non-grantor trusts can either be established during a person’s life, or set up after a person’s death, through his or her Will.įor the purposes of New York State trust taxation, the critical issue is whether a given trust is either grantor (or “pass through”) or non-grantor. The trustee manages the trust and follows out the instructions of the trustor. These types of trusts have a creator (or “trustor”), a fiduciary or trustee, and a beneficiary. Non-grantor trusts are subject to specific tax rates at the state level in New York, unless they’re exempt from taxation. Their tax treatment is separate from the beneficiary’s. Non-grantor trusts are distinct legal entities. A Grantor trust is one in which the beneficiary and the fiduciary (also known as the “trustee”) are one and the same person. This means that its income automatically passes through to the beneficiary and is reported on the individual’s tax return. A “grantor” trust is a pass through entity. Whether a trust falls into one of these two types is a very important determination. ![]() However, there are 2 main types of trusts. There can be nearly as many types of trusts as there are purposes for them to serve. It’s possible to set up many different types of trusts. And then finally we will discuss the specifics of the tax treatment of trusts in New York. Then, we will discuss the three separate categories of trusts in New York State. This will give readers an understanding of which trusts are subject to income tax. First, we will go over the basic distinction between grantor and non-grantor trusts. Proper tax planning can always improve the tax treatment of a given trust, but on the whole, resident married individuals and other persons are better off from a tax standpoint. As we will see, trusts receive less favorable treatment than other persons at the state level in New York. In this post, we explore the basics of how trust taxation in New York State. Familiarizing oneself with these terms and concepts takes time and effort. As with other areas of tax law, trust taxation is difficult in part because it has its own lingo and its own concepts to master. In the past, we’ve just briefly dipped into the realm of trust taxation. But this usually requires a great deal of research and expertise. Proper tax planning can result in huge tax savings. Tax planning for trusts in New York requires a highly sophisticated analysis. But trusts are also subject to tax in the State of New York. There are many pieces of information to take in. New York State income taxation of trusts can be a tricky subject.
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