How is a trust taxed?
Trusts are subject to income taxation in Maryland, just like any other form of income. Trusts are taxed the same way that an individual or corporation would be taxed on their income. In Maryland, trusts are taxed on the basis of the trust’s income, not the beneficiaries of the trust. The trust’s taxable income can include any income that the trust earns from investments, including capital gains, interest, dividends, and rents. In addition, any trust income that is distributed to the beneficiaries of the trust is also taxable. Depending on the type of trust, the trustee may pay the taxes on the trust income, or the beneficiaries may be responsible for paying the taxes on income they receive. In addition to being subject to income taxes, trusts may also be subject to estate taxes when the original settlor of the trust passes away. This depends on the type and value of the trust. Any applicable estate taxes are paid by the estate of the settlor, not the beneficiaries of the trust. Overall, trust taxation is a complex system in Maryland, but understanding it is essential for any beneficiary of a trust. It is important to understand the various taxes that may be owed by the trust or its beneficiaries so that you can adjust your financial plans accordingly.
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