What Is a K-1 Tax Form for Estates and Trusts?

A K-1 tax form for an estate is the document an executor gives you each year the estate is open, telling you your share of the estate’s interest, dividends, capital gains, deductions, and credits so you can report them on your personal Form 1040.¹ The estate files its own return on Form 1041 and treats income it distributes to you as its deduction and your income. The K-1 is how those numbers move from the estate’s return to yours.

What the K-1 Reports

Schedule K-1 breaks your share into categories so each type of income lands on the correct line of your return. The main boxes are:²

Box 1 for interest income.
Boxes 2a and 2b for ordinary and qualified dividends.
Boxes 3 and 4a for net short-term and net long-term capital gains.
Boxes 9 through 11 for deductions the estate passes through, including the estate tax deduction for income in respect of a decedent and any final-year excess deductions.
Box 13 for credits and any estimated tax payments the executor allocated to you.
Box 14 for other information, including tax-exempt interest.

The character of each item is preserved. Long-term capital gain on the estate’s return stays long-term capital gain on yours. Qualified dividends stay qualified. Tax-exempt interest stays tax-exempt.

Inheriting Property Is Not the Same as Receiving Income

The K-1 does not tax you on the inheritance itself. If a will leaves you a house or a fixed sum of money, that specific bequest is generally excluded from the estate’s distributable net income calculation, which is what determines how much taxable income gets pushed onto K-1s.³

What the K-1 does report is income the estate earned after the date of death: interest accruing on the decedent’s bank accounts, dividends paid on inherited stock, rent collected on estate-owned property. When the estate distributes that income to you, it comes off the estate’s return and onto yours through the K-1.

Discretionary distributions of principal sit in between. They can carry taxable income to you to the extent the estate’s distributable net income hasn’t already been absorbed by other distributions. If you receive what you think is a principal distribution and later get a K-1 showing income, this is why.

Where Each Box Goes on Your 1040

Each box on the K-1 corresponds to a specific place on your return.¹ Interest from Box 1 goes on Schedule B. Capital gains from Boxes 3 and 4a go on Schedule D. Most other pass-through items land on Schedule E, Part III, which is the section built for estate and trust income. Foreign tax credits may need Form 1116.

Your return has to match what the estate reported. You can take a different position if you disagree with a K-1 figure, but you have to notify the IRS of the inconsistency or you risk penalties.⁴

Income in Respect of a Decedent

Some of the money the estate collects is income the decedent had earned or was entitled to before death but never received: an uncashed final paycheck, accrued interest on savings bonds, distributions from retirement accounts. This is income in respect of a decedent, or IRD. It keeps whatever character it would have had if the decedent had lived to collect it, so ordinary income stays ordinary and capital gain stays capital gain.³

IRD can be taxed twice when the estate is large enough to owe federal estate tax: once as part of the taxable estate and again as income when it’s collected. Section 691(c) provides a deduction for the portion of federal estate tax attributable to the IRD, and when the estate distributes the IRD to you, that deduction passes through and appears in Box 10 of your K-1.⁵¹ The calculation is complicated enough that most executors get professional help, but if you’re the beneficiary of a taxable estate, check Box 10. Missing it means overpaying on income the estate already paid tax on.

Final-Year K-1s Are Different

When the estate closes, the K-1 you receive for that last year may carry benefits that don’t appear on prior K-1s. Two are worth knowing about.

Excess Deductions

If the estate’s deductions exceed its gross income in the final year, the leftover deductions pass through to you and the other beneficiaries who inherit the estate’s property.⁶ They show up in Box 11 and retain their character. Section 67(e) expenses (costs unique to administering the estate) are claimed as an adjustment to income on Schedule 1. Non-miscellaneous itemized deductions go on Schedule A.¹

The catch: you can only use excess deductions in the tax year the estate terminates. Whatever you can’t absorb against your income that year is gone. You cannot carry it forward.⁷

Capital Loss and NOL Carryovers

Unused net operating losses and capital loss carryovers the estate still holds at termination also pass through to beneficiaries.⁶ Unlike excess deductions, these are not use-it-or-lose-it. You can carry them forward under the normal capital loss rules, keeping the long-term or short-term character they had inside the estate.⁸ Corporate beneficiaries are the narrow exception: their inherited carryovers become short-term.

When to Expect Your K-1

The executor has to give you your K-1 on or before the date Form 1041 is due.³ For a calendar-year estate, that’s April 15.⁹ Estates are also allowed to elect a fiscal year ending on the last day of any month, so if the estate you’re a beneficiary of doesn’t operate on a calendar year, its K-1 will arrive on a different cycle than your personal return, which usually means you need an extension on your 1040 until the K-1 shows up.

Executors can also file Form 7004 for an automatic extension of the Form 1041 deadline, which pushes back your K-1 delivery date by the same period.³ If the executor is running late, ask for a draft. You will likely need to extend your own return.

Estimated Tax and Passive Loss Traps

A large K-1 from an estate can create an underpayment penalty on your personal return if you weren’t making quarterly estimated payments to cover it. The executor can help by allocating some of the estate’s estimated tax payments directly to you using Form 1041-T. When that happens, the credited amount appears in Box 13 with Code A, and you treat it as an estimated payment you made on January 15 of the following year for penalty purposes.¹

If the K-1 shows a loss from a rental property or another passive activity, the ordinary passive activity rules apply to you. You generally cannot use a passive loss to offset wages or interest income. The main exception is the $25,000 allowance for rental real estate losses if you actively participate, and that allowance phases out at higher incomes. Note also that an estate is treated as actively participating in a rental real estate activity for up to two years after the decedent’s death if the decedent would have qualified.¹⁰ After that window, the character of what flows through on the K-1 can change.

How Long to Keep the K-1

The general IRS rule is to keep tax records for three years from the date you filed the return, or two years from the date you paid the tax, whichever is later.¹¹

Internal Revenue Service. 2025 Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 or 1040-SR

Internal Revenue Service. Schedule K-1 (Form 1041) 2025 Beneficiary’s Share of Income, Deductions, Credits, Etc.

Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025)

Office of the Law Revision Counsel. 26 U.S. Code 6034A – Information to Beneficiaries of Estates and Trusts

Office of the Law Revision Counsel. 26 U.S. Code 691 – Recipients of Income in Respect of Decedents

Office of the Law Revision Counsel. 26 U.S. Code 642 – Special Rules for Credits and Deductions

Electronic Code of Federal Regulations. 26 CFR 1.642(h)-2 – Excess Deductions on Termination of an Estate or Trust

eCFR. 26 CFR 1.642(h)-1 – Unused Loss Carryovers on Termination of an Estate or Trust

Internal Revenue Service. Forms 1041 and 1041-A: When to File

Internal Revenue Service. Publication 925, Passive Activity and At-Risk Rules

Internal Revenue Service.