Must an Irrevocable Trust with No Income File Tax Returns?

 In Irrevocable Trusts, Real Estate

Photo by Kelly Sikkema on Unsplash


If someone only places their house worth only $250,000 in an Irrevocable Trust, do they have to pay yearly income tax on it, when they are not renting it out and they are not getting any income from it? We have been told that we have to get a Tax ID # for an Irrevocable Trust and file a yearly tax return in Massachusetts. It is a Grantor Trust with two beneficiaries receiving equal distributions. If the house does get taxed in a trust, then how do they determine the tax?


If the property is not receiving any income, don’t worry about getting a tax ID number or filing a tax return for the trust. You’ll only need to do that if you were to begin renting out the property or if the trust were to sell it. In either case, since it’s a grantor trust, the income would pass through to the grantor. The trust would still have to file an income tax return, but only for reporting purposes. It would issue a so-called K-1 to the grantor, who would then report the income on her tax return.


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