Technical article
Which US States Tax a Trust, and Which Do Not
The sources name eight states with no tax on trust income.
Imagine a retired couple in Pennsylvania who plan a lasting family trust. A friend tells them to put the trust in Nevada, since Nevada has no income tax. Does the state where the trustee sits decide the tax?
For some states it does. For others it does not, and the state of the couple's own home may matter more.
Four tests
The sources group states by the test they use. They are dated: one chart is from 2014 and one article is from 2020, so a state's rule may have changed since.
| Test | States named in the sources |
|---|---|
| The settlor's home state | Connecticut, Illinois, Pennsylvania, Maine, Maryland, Michigan, Minnesota, Nebraska, Ohio, Oklahoma, Utah, Vermont, Virginia, West Virginia, Wisconsin, Washington DC, and New York in one source |
| The trustee's location or where the trust is run | California, Arizona, Colorado, Indiana, Kansas, Kentucky, Mississippi, Montana, New Mexico, Oregon, South Carolina, Utah, Virginia |
| The beneficiary's home | California (a resident heir with a non-contingent interest), Connecticut, Georgia, North Carolina |
| No tax on trust income | Alaska, Nevada, South Dakota, Wyoming, Florida, Texas, Washington, New Hampshire |
The sources differ on a few names. One lists New York among the settlor-home states and the other does not. Utah and Virginia appear in both the settlor column and the trustee column. North Carolina's heir-based tax was limited by the Supreme Court's Kaestner decision, according to a tier B article, which leaves doubt for similar rules in other states.
So the couple in Pennsylvania could be reached by Pennsylvania, whichever state the trustee is in. The tier A chart lists Pennsylvania as a settlor-home state. A Nevada trustee does not change that.
The eight states with no tax
The sources name eight states with no tax on trust income. Tennessee, listed in the 2020 article as taxing by the heir's home, repealed its interest and dividends tax from 2021. The table below covers nine states that were read closely, mostly from state pages.
| State | Tax on trust income | Estate or inheritance tax |
|---|---|---|
| South Dakota | None | None |
| Nevada | None among its tax types | None |
| Alaska | None | None listed |
| Wyoming | None | None listed |
| Tennessee | Interest and dividends tax repealed from 2021 | None since 2016 deaths |
| New Hampshire | Interest and dividends tax repealed in 2025 | None listed |
| Florida | None on individuals; a corporate-type tax capped at 5% could apply to entities | None |
| Texas | No personal income tax; a franchise tax may reach some non-grantor trusts | None |
| Delaware | Taxes trust income, with a deduction for income set aside for non-resident heirs | None for deaths after 2017 |
Delaware is the one of the nine that taxes retained income. A Delaware trust that holds income for heirs who live elsewhere may deduct it, so Delaware's tax reaches retained income that is not set aside for heirs who live elsewhere. A resident trust there is one made by a person living in Delaware, or one whose trustee lives or has a trust office in Delaware for more than half the year.
Texas franchise tax covers entities, and the sources leave open whether a given non-grantor trust is taxed. Wyoming's statement comes from a law firm memo to the legislature, which is tier C.
What does not change
All of this is state tax. Federal rules apply to a US trust wherever it sits, and a state with no income tax does not alter the 37% trust bracket above US$16,000 or the 30% withholding on payments to heirs abroad.
You could
You could check three things in this order: the settlor's home state, the trustee's state, and each heir's state.
Which of the three tests applies to your family's states? Share what you find. Someone choosing a trust state may find it useful.
Figures are estimates for planning, based on public data. Date read: October 2026.
Sources
- Wealth Management article on state income tax and trusts, May 2020 (B)
- Multistate Tax Commission presentation, 2014 (A)
- Key Wealth 2026 state summary (B)
- South Dakota Department of Revenue (A)
- Nevada Department of Taxation (A)
- Tennessee Department of Revenue (A)
- Delaware Code title 30 (A)
- Florida Constitution (A)
- Texas Comptroller (A)
- Tax Foundation (B)
- Long Reimer Winegar memo (C)
Tell us in the comments