Form 1041 Schedule G Instructions: Tax Lines and Credits

Form 1041 Schedule G is the tax computation and payments section of the U.S. Income Tax Return for Estates and Trusts. Part I adds up the regular income tax, alternative minimum tax, credits, and any additional taxes the entity owes; Part II records the payments already made against that liability. The total from Part I, line 9, moves to page 1 of Form 1041, line 24.¹

Every major tax component of a fiduciary return converges here. The regular tax comes from the rate schedule or the Schedule D worksheets. The AMT comes from Schedule I. The net investment income tax comes from Form 8960. If the trust is an electing small business trust, its S portion tax is calculated on a separate worksheet and dropped in. Schedule G is where the fiduciary assembles those pieces into one number.²

Line 1a: Regular Income Tax

Line 1a holds the regular income tax on the estate’s or trust’s taxable income. Most filers compute this using the tax rate schedule in the Form 1041 instructions. The brackets are compressed, and the top rate arrives quickly. For taxable years beginning in 2026:³

10% on taxable income up to $3,300
24% on income over $3,300 but not over $11,700 ($330 plus 24% of the excess over $3,300)
35% on income over $11,700 but not over $16,000 ($2,346 plus 35% of the excess over $11,700)
37% on income over $16,000 ($3,851 plus 37% of the excess over $16,000)

By comparison, an individual filer doesn’t reach 37% until income exceeds $626,350. That gap is the reason so much fiduciary planning centers on distributing income out to beneficiaries rather than retaining it at the entity level.

If the return includes net capital gains or qualified dividends, don’t use the rate schedule directly. Use Part V of Schedule D (Form 1041) or the Qualified Dividends Tax Worksheet in the instructions, both of which apply the preferential capital gains rates. The result still lands on line 1a.²

Line 1c: Alternative Minimum Tax

The AMT is computed on Schedule I (Form 1041) under Internal Revenue Code Section 55, then carried to Schedule G, line 1c.⁴ Start with regular taxable income and add back the deductions and preference items the AMT disallows. Common adjustments include recomputing depreciation under AMT rules and modifying the income distribution deduction. The result is alternative minimum taxable income, or AMTI.

AMTI is then reduced by an exemption. For 2026, the AMT exemption for estates and trusts is $31,400. It begins phasing out when AMTI exceeds $104,800, losing 25 cents per dollar above that threshold, and disappears entirely at $167,600.³

After subtracting the remaining exemption, apply the two-tier rate: 26% on the first portion and 28% on amounts above a threshold that adjusts each year for inflation. The 2025 threshold was $239,100; the 2026 figure will appear when the updated Schedule I instructions are released.⁵

AMT only produces additional tax when it exceeds the regular tax. If regular tax is already higher, AMT adds nothing. The amount from Schedule I, line 54, is what goes on Schedule G, line 1c.²

Lines 2a Through 2e: Credits

After line 1e combines the regular tax and AMT, lines 2a through 2d let you subtract available credits dollar-for-dollar.

Line 2a is the foreign tax credit. If the estate or trust earned foreign-source income and paid tax to another country, attach Form 1116 and enter the allowable credit.
Line 2b is the general business credit from Form 3800. Enter only the estate’s or trust’s own share; amounts allocated to beneficiaries don’t belong here.
Line 2c is the credit for prior year minimum tax. If the entity paid AMT in an earlier year and has an unused minimum tax credit, attach Form 8801.
Line 2d covers bond credits reported on Form 8912. The credit amount also has to be picked up in interest income on the return.

Line 2e totals the credits. Subtract 2e from 1e to get line 3, the tax after credits and before the additional taxes on lines 4 through 8.²

Line 4: ESBT Tax on S Corporation Income

If the trust is an electing small business trust holding stock in one or more S corporations, the S portion is taxed as though it were a standalone trust, and its tax goes on line 4.⁶ The rules diverge sharply from ordinary trust taxation:

The S portion includes only the income, losses, deductions, and credits from the S corporation, plus any gain or loss from selling S corporation stock.
The rate is a flat 37% on the S portion’s taxable income. Qualified dividends and capital gains still get preferential rates.
No income distribution deduction is allowed for the S portion, and no personal exemption amount can be claimed.
The S portion gets no AMT exemption.

Compute the tax on the ESBT Tax Worksheet in the Form 1041 instructions and enter the amount from line 17 of that worksheet on Schedule G, line 4. When figuring the tax and distributable net income on the non-S portion, ignore all S corporation items.⁶

Line 5: Net Investment Income Tax

Estates and trusts owe a 3.8% net investment income tax on the lesser of net investment income or the excess of adjusted gross income over the threshold where the top bracket begins. For 2026, that threshold is $16,000, the same point where the 37% rate kicks in.³

The tax itself is computed on Form 8960. Net investment income includes interest, dividends, capital gains, rental income, royalties, and income from passive activities. It doesn’t include wages, self-employment income, or distributions from qualified retirement plans. Carry the amount from Form 8960, line 21, to Schedule G, line 5.⁷

Because the threshold is so low, the NIIT hits nearly every trust that retains investment income. This is another reason fiduciaries commonly push income out to beneficiaries, who face much higher thresholds before the same tax applies.

Line 8: Accumulation Distribution Tax

Line 8 is where any tax on accumulation distributions from Form 4970 is entered. Write “From Form 4970” and the amount to the left of the entry space.⁸

Most domestic trusts can skip this line. The Taxpayer Relief Act of 1997 largely repealed the throwback rule for domestic trusts. It still applies to two narrow categories:⁹

Domestic trusts that were previously treated as foreign trusts at any point
Trusts created before March 1, 1984, unless they would not be aggregated with other trusts under the related-trust rules

For a trust that is subject to the rule, the accumulation distribution itself is worked out on Schedule J (Form 1041), which identifies undistributed net income from prior years and allocates the current distribution across those years. The trustee provides the beneficiary a completed Part IV of Schedule J so the beneficiary can prepare Form 4970 using the partial tax method under Section 667.¹⁰ Foreign trust distributions also carry an interest charge under Section 668 on top of the partial tax.

Line 9 and Part II: Total Tax and Payments

Line 9 adds lines 3 through 8. That total is what you carry to page 1 of Form 1041, line 24. Confirm each additional tax (ESBT, NIIT, accumulation distribution) is entered on its own line before totaling.¹

Part II tracks payments already applied to the liability: estimated tax payments made during the year, any amount paid with Form 7004 when requesting an automatic extension, and federal income tax withheld from income reported to the estate or trust on Forms 1099 or Schedule K-1. The difference between Part I’s total tax and Part II’s payments tells you whether a balance is due or a refund is coming.²

Common Errors and What They Cost

Because everything on Schedule G feeds line 24 of Form 1041, a mistake on any line understates total tax. The three errors that show up most often are failing to compute AMT on Schedule I when it applies, omitting the NIIT on line 5, and running ESBT income through the graduated brackets instead of the flat 37%.

The accuracy-related penalty under Section 6662 is 20% of the underpayment attributable to substantial understatement or negligence, and 40% for gross valuation misstatements or undisclosed foreign financial asset understatements.¹¹ Interest also accrues on unpaid tax from the original due date until the balance is paid. For the second quarter of 2026, the IRS underpayment interest rate is 6%, following 7% in the first quarter.¹²

1
Internal Revenue Service. U.S. Income Tax Return for Estates and Trusts
2
Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025)
3
Internal Revenue Service. Rev. Proc. 2025-32
4
Office of the Law Revision Counsel. 26 USC 55 Alternative Minimum Tax Imposed
5
Internal Revenue Service. Instructions for Schedule I (Form 1041) (2025)
6
Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1
7
Internal Revenue Service. Instructions for Form 8960 (2025)
8
Internal Revenue Service. Tax on Accumulation Distribution of Trusts – Form 4970
9
Office of the Law Revision Counsel. 26 USC 665 Definitions Applicable to Subpart D
10
Office of the Law Revision Counsel. 26 USC 667 Treatment of Amounts Deemed Distributed by Trust in Preceding Years
11
Office of the Law Revision Counsel. 26 USC 6662 Imposition of Accuracy-Related Penalty on Underpayments
12
Internal Revenue Service. Internal Revenue Bulletin 2026-08