Is a trust income taxed by the government?

During the grantor’s lifetime, there are usually no federal income taxes for a revocable trust. The trust will use your social security number as its tax identification number, which will report the income and deductions directly on your individual income tax return.

Once a revocable trust does not report income under your social security number, it will become a separate entity for federal income tax purposes. If this happens, the trustee must file an annual fiduciary income tax return. The terms of the trust will determine who is responsible for paying income tax on the trust income.