Updated October 5, 2026. Quick answer: Yes. Indiana taxes trust income on Form IT-41, and for the 2025 tax year the instructions say to “Multiply the amount on line 9 by 3% (.03)” for the state adjusted gross income tax on line 10.
How Indiana treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Indiana taxes estates and trusts on Form IT-41 and sorts each one into a resident or nonresident class. The source says: “estates and trusts are classified as either resident or nonresident” for purposes of the Indiana Fiduciary Income Tax Return. |
| Who counts as a resident trust | Residence turns on where the trust is administered, meaning where the trustee is located and where the records are kept, and for an estate on the decedent’s residence at death. The source says: “the residence of a trust is determined” by the location where it is administered. |
| Rate on trust income | Trust income is taxed at one flat rate, and the 2025 instructions apply 3% to Indiana taxable income on line 9. The source says: “Multiply the amount on line 9 by 3% (.03)”. The result is the state adjusted gross income tax entered on line 10. |
| Distribution deduction | The booklet describes an income distribution deduction that is calculated at the federal level, and it tells a trust with no federal taxable income because of distributions to enter zero on line 1. The source says: “may be allowed an income distribution deduction for distributions to beneficiaries”. The instructions do not describe a separate Indiana distribution deduction. |
| Nonresident trusts | A nonresident trust is taxed only on income from Indiana sources, with income inside and outside the state sourced under IC 6-3-2-2. The source says: “Nonresident estates and trusts are taxable in Indiana” on all federal taxable income derived from Indiana sources. |
| Return to file | A resident trust with gross income above the federal filing amount, currently $600, files Form IT-41, and a nonresident trust files if it has Indiana source gross income above that amount. The source says: “must be filed by the 15th day of the fourth month” following the close of the taxable year. |
| Nonresident beneficiaries | A trust with beneficiaries who live outside Indiana has an added composite return duty. The source says: “must file a composite return and include all its nonresident beneficiaries”. The booklet allows Schedule PTET to serve as that composite return when the stated boxes are checked. |
A $10,000 example
A trust with $10,000 of taxable income that it keeps, rather than distributes, is taxed at 3%, computed as $10,000 x 3% = $300, before any deduction or exemption the state allows. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The 2025 booklet prints no 2026 rate for the trust computation on line 10; the only 2026 rate it prints, 2.95%, applies to the pass-through entity tax and to the state tax computed on Schedule Composite, not to the trust computation on line 10.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Indiana taxes retirement income, whether Indiana taxes pensions, what a living trust costs in Indiana, and federal trust tax brackets.
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Answer againSources
- 2025 IT-41 Fiduciary Income Tax Booklet (Indiana Department of Revenue): https://forms.in.gov/Download.aspx?id=16903
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.