Fiduciary tax is due on the portion of income from an estate or trust not distributable to beneficiaries. Kentucky's income tax law is based on the Internal Revenue Code in effect as of December 31, 2022. The tax is calculated using a rate of 4.5%.
Nonresident estates and trusts are subject to tax on income from Kentucky sources; from activities carried on in Kentucky; from performance of services in Kentucky; from real or tangible property located in Kentucky; and from partnerships or S-corporations doing business in Kentucky.
Income from intangibles attributed to nonresident beneficiaries is not taxable on the Kentucky fiduciary return.
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The following items are
not deductible on the 741 Kentucky Fiduciary Income Tax Return and must now be added back on Form 741, Schedule M:
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- Real estate, local, and property taxes deducted on federal Form 1041
- Investment interest deducted on federal Form 1041
- Fiduciary fees deducted on federal Form 1041 other than those described in IRC Section 67(e)
- Attorney, accountant, and preparer fees deducted on federal Form 1041 other than those described in IRC Section 67(e)
- Qualified Business Income (QBI) deduction listed on federal Form 1041 (Tax year 2018 only)
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The following items are
still allowable on the 741 Kentucky Fiduciary Income Tax Return and do not need to be added back on Form 741, Schedule M:
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- Fiduciary fees paid or incurred to the fiduciary for administering the estate or trust during the tax year
- Attorney, accountant, and return preparer fees paid for preparation of fiduciary income tax returns, the decedent's final individual income tax returns, and all estate and generation skipping transfer tax returns
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For more in depth information, please see DOR's Technical Advice Memorandum, KY-TAM-19-01, Deductibility of IRC Section 67(e) Fiduciary Expenses.