what is distributable net income 
the term distributable net income dni refers to income allocated from a trust to its beneficiaries distributable net income is the maximum amount received by a unitholder or a beneficiary that is taxable this figure is capped to ensure there is no instance of double taxation any amount above the dni is therefore tax free understanding distributable net income dni the internal revenue service irs considers distributable net income to be an estimate of the economic value that stems from a distribution to a beneficiary a distribution is a payment made from a fund an estate or an income trust to a beneficiary dni gives beneficiaries a reliable income source while minimizing the amount of income taxes paid by the trust just like individuals estates and non grantor trusts must file income tax returns non grantor trusts are still funded by the grantor the person or entity that creates the trust but this kind of trust functions entirely on its own from the grantor who gives up control of the assets to the trust the income these trusts report is taxed at either the entity or beneficiary level which level is taxed depends on whether it is allocated to the principal amount or to the distributable income and whether the amount is distributed to the beneficiaries according to u s tax code estates and trusts are allowed to deduct the sum of the trust income required to be distributed and other amounts properly paid or credited or required to be distributed or the distributable net income whichever is less to beneficiaries to prevent double taxation on income 1 an income trust recognizes distributable net income as an amount transferred to unitholders with an estate trust it s the amount to be distributed to a beneficiary estates and trusts are allowed to deduct the distributable net income or the sum of the trust income required to be distributed whichever is less 1special considerationsas noted above when a trust calculates the distributable net income it essentially prevents any instance of double taxation of the funds issued by a trust the formula to calculate the figure is as follows in instances where there are capital losses that figure replaces the capital gains and is added to the formula instead of subtracted the personal exemption repealed for individuals through 2025 as part of the tax cuts and jobs act tcja was not repealed for trusts and estates trusts are allowed 100 or 300 exemptions while estates are allowed a 600 exemption 2in order to calculate the taxable income you need to add the interest income dividends and capital gains then subtract any fees and tax exemptions unlike the dni calculation capital gains are added in the taxable income formula while capital losses are subtracted distributable net income dni vs net incomedistributable net income shouldn t be confused with net income as they are two different things while dni is the income distributed from a trust to its beneficiary or beneficiaries net income is used by a business to calculate its earnings per share eps the total profit of a company divided by the number of outstanding shares of its common stock and is also referred to as net earnings net income appears on a company s balance sheet and helps indicate how profitable the company is in order to calculate its net income corporations subtract any general and administrative expenses operating expenses interest taxes other expenses and the cost of goods sold cogs from the total amount of sales net income can also be used to refer to an individual s take home pay this is the amount of money a person receives after any deductions are taken from their paychecks such as taxes healthcare disability insurance and any other expenses a person s net income can be contrasted with their gross income the amount they receive before any deductions example of distributable net income dni here s an example of how dni is calculated using a fictional trust we ll call abc trust let s say abc trust reported total income of 40 000 interest income was 10 000 of this while the remaining 30 000 was derived from dividends fees charged by the trust amounted to 3 000 and the trust realized a capital gain of 15 000 an exemption of 300 applied to the trust if we use the formula above the trust s taxable income is 51 700 we can then use this taxable income figure to calculate the dni which would be 37 000 