Personal Exemption Amounts for Estates and Trusts: Form 1041 Rules

The personal exemption for estates and trusts on Form 1041 is a fixed dollar deduction set by Internal Revenue Code Section 642(b): $600 for a decedent’s estate, $300 for a simple trust, $100 for a complex trust, and $5,300 for a qualified disability trust in tax year 2026. None of these amounts phase out at higher income levels, and none are prorated for short tax years. The fiduciary claims the flat amount on Line 21 of Form 1041.¹

How Much Each Entity Can Deduct

Section 642(b) fixes the exemption by entity type, and those dollar figures have not been adjusted for inflation in decades.

Estates get $600. A decedent’s estate takes the full $600 no matter how much income it earns or how many months it was open during the tax year.¹
Simple trusts get $300. A trust is simple if its governing instrument requires all net income to be distributed each year, it makes no charitable contributions, and it distributes no principal during the tax year.¹
Complex trusts get $100. Any trust that fails the simple-trust definition is complex. Discretionary distributions, accumulated income, or charitable gifts all push a trust into this category.¹

Classification is decided year by year based on what the trust actually did, not just what the document permits. A trust that normally operates as simple but distributes principal in a given year becomes complex for that year and drops to the $100 exemption.

The exemption does not phase out. Whether the estate reports $1,000 of income or $10 million, the $600 comes off in full.¹

The Qualified Disability Trust Exemption

A qualified disability trust (QDT) is the one meaningful outlier. Its exemption for 2026 is $5,300, roughly 53 times what a complex trust receives.² That matters because estates and trusts hit the top 37% bracket at just $16,000 of taxable income, so shielding $5,300 preserves real money inside the trust.

Section 642(b)(2)(C) ties the QDT exemption to the individual personal exemption amount that used to exist under Section 151(d). The Tax Cuts and Jobs Act zeroed out the individual exemption starting in 2018, and the One Big Beautiful Bill Act made that permanent, but Congress carved out qualified disability trusts. The IRS keeps computing the QDT figure as though the individual exemption still applied and adjusts it annually for inflation.³¹

To qualify, the trust must be established under a provision of the Social Security Act that governs disability trusts. Every beneficiary must be certified by the Social Security Administration as disabled, meaning a physical or mental impairment expected to prevent substantial gainful activity for at least twelve months. The trust must also have been funded before the beneficiary turned 65. Like the other exemptions on Line 21, the QDT amount does not phase out at higher income.

Short Years, Final Years, and Grantor Trusts

Short Tax Years

An estate that exists for only a few months of the year still claims the full $600. The IRS instructions do not prorate the exemption, and the statute states a flat amount rather than a daily or monthly figure.⁴ The same rule applies to trusts taking the $300 or $100 amount.

Final-Year Returns

In the year an estate or trust terminates, the exemption is still available, but it can only offset whatever taxable income remains after distributions and other deductions. If everything has been distributed and no taxable income is left on the return, the exemption produces no benefit because there is nothing for it to reduce. Fiduciaries closing an entity should time the final distributions with any remaining income in mind.

Grantor Trusts

Grantor trusts do not claim the exemption in the ordinary way. Income from a grantor trust is taxed to the person who created it, not to the trust. The fiduciary files Form 1041 with only entity information and attaches a statement attributing income and deductions to the grantor, so the income lines carry no dollar amounts for the exemption to reduce.⁵ One exception matters: a qualified revocable trust that makes a Section 645 election to be treated as part of the decedent’s estate can claim the $600 estate exemption for the duration of the election period.

Where the Exemption Goes on Form 1041

The exemption is entered on Line 21 of Form 1041, in the block where adjusted total income becomes taxable income.⁶ The fiduciary enters $600, $300, $100, or $5,300 based on how the entity is classified for the year. Line 21 sits after the income distribution deduction, so the exemption reduces whatever taxable income the entity retains after distributions to beneficiaries.

The entity needs its own Employer Identification Number to file. An EIN is separate from the decedent’s Social Security number and from the fiduciary’s personal tax ID. If the EIN application is pending, the fiduciary writes “Applied for” in the EIN field along with the application date.⁴

1
Office of the Law Revision Counsel. 26 USC 642 – Special Rules for Credits and Deductions
2
Internal Revenue Service. 2026 Form 1041-ES Estimated Income Tax for Estates and Trusts
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1
5
Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1
6
Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 – Section: Line 21—Exemption