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Distributable Net Income

What distributable net income is, how it limits a trust's distribution deduction, why distributing saves tax under the 2026 trust brackets, and a calculator.

Updated November 4, 2026. Free, no sign-up; everything runs in your browser and nothing you type is stored.

Distributable net income calculator (2026)

Taxable interest, dividends and rents ($)Tax-exempt interest ($)Capital gains kept in principal ($)Deductible fees and expenses ($)Distributions to beneficiaries ($)Type

Trust tax saved by distributing

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–Distributable net income (DNI)

–Income distribution deduction

–Trust tax after distributing

–Trust tax if nothing is distributed

What distributable net income is

Distributable net income (DNI) is the ceiling on how much of a trust's or estate's income can be pushed out to beneficiaries and taxed to them instead of to the trust. It's figured on Form 1041 Schedule B: roughly taxable income before the distribution deduction, plus tax-exempt interest (net of related expenses), minus capital gains allocated to principal, ignoring the exemption.

The trust deducts what it distributes, up to DNI (Schedule B income distribution deduction, excluding the tax-exempt part), and each beneficiary gets a Schedule K-1 showing their share, which keeps its character (interest, dividends, tax-exempt).

Why it matters: 2026 trust brackets

Trust taxable income	Rate
$0 – $3,300	10%
$3,300 – $11,700	24%
$11,700 – $16,000	35%
Over $16,000	37%

A trust hits the 37% rate at just $16,000 of taxable income (IRS Rev. Proc. 2025-32), and the 3.8% net investment income tax starts at the same point, compared with $640,600 for a single person. Distributing income to beneficiaries in lower brackets often saves thousands. Example: the calculator's defaults save $14,982 of trust tax by distributing $40,000.

Beneficiaries then pay tax on their K-1 income: see K1 tax form.

Common questions

What is distributable net income?

The limit on the income a trust or estate can deduct for distributions, which is then taxed to beneficiaries.

When does a trust reach the 37% bracket in 2026?

At $16,000 of taxable income.

Are capital gains included in DNI?

Usually not, when they're allocated to principal.

Sources

More paycheck and tax calculators: COBRA Health Insurance · Covered California · Do You Pay Tax on Social Security · Earned Income Tax Credit

General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.