What is the taxation of trust income?
In Hawaii, trust income is taxed at the same rate as standard income. Trust income consists of money generated from a trust, such as rent payments, capital gains, dividends and other investment returns. If the beneficiary, or person who receives the money from the trust, is a Hawaii resident, then the income is taxed according to the Hawaii state income tax rates. If the beneficiary lives in another state, the trust income is taxed according to the applicable state income tax rates. Any trust income taxable in Hawaii must be reported as income before any deductions or credits are taken. This means that if a person has $10,000 in trust income, they would need to report the $10,000 as income before any deductions or credits can be claimed. Additionally, any interest or dividend income from outside of Hawaii is not taxable in Hawaii, so it is important to determine whether the trust income is generated in Hawaii or another state. Trust income is subject to federal income tax as well, and must be reported on the tax return of the beneficiary. If the trust is managed by someone other than the beneficiary, such as a trustee, then the trustee must report the income and file a return on behalf of the beneficiary. If the trust is managed by the beneficiary, then the beneficiary must report the income as personal income on their personal tax return. Overall, trust income is taxed at the same rate as standard income, so long as the income is generated from Hawaii or another state.
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