By Harry S. Margolis
Trusts pay taxes on income like individual taxpayers, whether this consists of investment income such as dividends, interest, and capital gains, or business income, such as rental income on real estate owned by the trust.
However, there are two major differences. The first is that the tax rates for trusts are significantly compressed for trusts as compared to those for individuals. For instance, the top rate of 39.6 percent kicks in at $250,000 of income for individuals ($300,000 for married couples filing jointly) and at $11,950 for trusts.