If you had a loved one who died last year, you may face the need to file estate or trust taxes.
When someone dies, their assets belong to the estate. Any income generated by the assets in that estate is income from the estate. If the property generates more than $600 in income, the property is responsible for paying income taxes.
Here’s what you need to know about estate and trust taxes. If you’re simply looking for the best tax software overall, check out our guide to the best tax software here.
Personal Income Tax Return vs. Estate Income Tax Return and Trust vs. Estate Tax
If a parent or spouse died during the last tax year, you will likely be required to file a tax return for that person. This person’s income earned during his lifetime must be submitted as part of his regular tax return. You can use any major tax software to handle a deceased person’s tax return.
In addition to a person’s lifetime income, you may be asked to file a return for their estate. Any income earned after the death of a deceased person is attributed to his or her estate. This could include rental income after death, royalties, or even income from business transactions. If an estate earns more than $600, it must file IRS Form 1041.
Estate and trust income tax returns are different from personal tax returns. When a person earns income after their death, that income is attributed to the estate and not to the individual. While deceased persons do not earn income from employment, they may earn income from rent, royalties, or even income from business transactions.
Any estate earning more than $600 must file IRS Form 1041. Typically, the personal representative or executor of the will will file this form for the deceased person. Trusts, arrangements in which a trustee manages funds on behalf of a beneficiary, are subject to the same IRS filing requirements.
Estates and trusts also have to deal with the transfer of wealth to individuals. At this point, estate distributions are rarely taxable to the beneficiary. The estate tax (also called the wealth transfer tax) is imposed on estates worth more than $13.99 million. Estates worth more than $13.99 million need to file IRS Form 706. People handling an estate of this size should consult a Certified Public Accountant (CPA) for specific advice on how to handle the conveyancing process most efficiently.
Tax software considerations for estate and trust income taxes
Preparing an estate or trust return bears some similarities to filing a personal return. However, tax software must do more than just maximize refund verification. These are some of the “must-haves” for estates and trusts that want to use software to file their returns.
Create accurate K-1 forms for beneficiaries
All real estate and tax software must be created Forms K-1 For each of the beneficiaries. These forms indicate the amount your beneficiaries must pay in income tax. Form K-1 does not cover all wealth transfers. It only covers distributions from the current income of the estate.
For example, let’s say a property generates $5,000 in income from a rental property. He pays $500 for advice from a lawyer. He then passes the remaining $4,500 to five beneficiaries. Ownership becomes responsible for creating five unique Schedule K-1 forms for each beneficiary.
While the estate is in probate, the estate needs to require an Employer Identification Number (EIN) to properly file Form 1041. That’s easy File for an EIN online. Once you have an Employer Identification Number (EIN) for the trust, you can file taxes (Form 1041) for the estate.
Calculate and pay income taxes
It is equally important to create tax software Form 1041 To the state. Form 1041 indicates whether the estate or trust owes taxes or is eligible for a tax refund.
Like individuals, estates can generate income, and may be eligible for certain deductions (for example, charitable giving deductions or qualified business income deductions). Tax software should easily handle these types of calculations. It should also help filers e-file with IRS Form 1041.
What tax software can be used to file taxes on estates or trusts?
It is common for estates to hire a professional to file the estate’s tax credit. After all, creating K-1 forms and knowing the rules of Form 1041 can be complicated and time-consuming. However, administrators of a relatively small estate may decide to file the taxes themselves.
Most tax software is designed to file IRS Form 1041 for tax professionals. These companies have expensive price points (where recruiting a CPA will be less expensive). In addition, most programs are confusing for novice users.
But for everyday filing, we found two software packages that allow users to file Form 1041 and issue Schedule K-1 forms.
TaxAct Estates and Trusts focuses more on estate planning situations than TurboTax Business. However, properties with many business deductions (such as expenses and depreciation from rental properties) may find TurboTax easier to use.
Frequently asked questions about estate taxes and trusts
Let’s answer some of the most common questions people have about how to file estate and trust taxes.
My husband died last year. Do I need to file a return for them?
As a surviving spouse, you will have to work with your deceased spouse’s representative to file a joint income tax return. This return (IRS Form 1040) is filed as if it were a typical tax return.
Surviving spouses may file this declaration without a spousal representative if a representative has not been appointed by the court. As a surviving spouse, you are eligible to claim a full refund if you file a joint return with your deceased spouse.
Does my estate need to file a tax form before distributing estate assets?
It is unlikely that an estate will have to file a tax form. Estates larger than about $13.99 million in 2025 are subject to the estate tax. Estates must file IRS Form 706. Estates of this size typically must enlist the help of a CPA to resolve any issues and efficiently transfer the wealth to the beneficiaries.
I am responsible for filing a return for the property. Should I do it myself or hire a professional?
Tech-savvy people may decide to save a few hundred dollars and use software to file IRS Form 1041. But in many cases, working with a tax professional can ensure your tax return is filed correctly and deductions are maximized.
You have received a K-1 from an estate. What should I do?
If you receive a K-1 from an estate, you are responsible for paying tax on the income you received. The income is counted as ordinary income, so you will be taxed at your marginal tax rate. Most major tax programs support income from K-1 forms. We especially like TaxHawk, H&R Block, and TaxSlayer for people who need to file on multiple income schedules.
Final thoughts
The software listed here is designed to simplify the process of paying income taxes on estates or trusts. However, in complex situations, it may make sense to hand this task over to a professional who can handle all the heavy lifting of filing your estate tax returns accurately.
If you need help from a tax professional, check out this guide on how to find a tax preparer near you.
