The IRS has enacted revenue procedure 2018-57 which updates rules in the tax code, which updates include regular adjustments for inflation. Included in these updates are adjustments to the 2019 tax brackets for estate and trust taxable income.

Important note – estates and trusts pay income tax too!! Income tax is not only paid by individuals.

For tax year 2019, the tax brackets are 10%, 24%, 35%, and 37% which are different from the 2018 brackets (15%, 24%, 28%, 33% and 39.6%). Given the changes to the tax brackets, including the removal of an intermediate bracket, the income tax calculations have changed.

10% Bracket
Taxable income not exceeding $2,600 results in a tax of 10% of the taxable income. For 2018 tax year, taxable income not exceeding $2,600 resulted in a tax of 15% of the taxable income.

24% Bracket
Taxable income exceeding $2,600, but not exceeding $9,300, results in a tax of $260.00 plus 24% of the excess over $2,600. For 2018 tax year, taxable income exceeding $2,600, but not exceeding $6,100, resulted in a tax of $390.00 plus 25% of the excess over $2,600. 2018 tax year also had an additional intermediate tax bracket of 28% which was removed for 2019. For 2018 tax year, taxable income exceeding $6,100, but not exceeding $9,300, resulted in a tax of $1,265.00 plus 28% of the excess over $6,100.

35% Bracket
Taxable income exceeding $9,300, but not exceeding $12,750, results in a tax of $1,868.00 plus 35% of the excess over $9,300. For 2018 tax year, taxable income over $9,300, but not exceeding $12,700, resulted in a tax of $2,161.00 plus 33% of the excess over $9,300.

37% Bracket
Taxable income exceeding $12,750 results in a tax of $3,075.50 plus 37% of the excess over $12,750. For 2018 tax year, taxable income over $12,700 resulted in a tax of $3,283.00 plus 39.6% of the excess over $12,700.

Examples:

Below are some examples of taxable income calculations in 2018 versus 2019:

  • Taxable income of $2,550: in 2018 the tax is $382.50 versus $255.00 in 2019.
  • Taxable income of $6,000: in 2018 the tax is $1,240.00 versus $1,076.00 in 2019.
  • Taxable income of $9,500: in 2018 the tax is $2,227.00 versus $1,938 in 2019.
  • Taxable income of $12,950: in 2018 the tax is $3,382.00 versus $3,149.50 in 2019.

 

By Wayne Carribus, ESQ, CPA. at Futterman, Lanza & Pasculli, LLP with offices in Smithtown, Bay Shore and Garden City, NY and clients throughout metro New York. He concentrates his practice on Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.