Maryland Form 504: The Estate Fiduciary Income Tax Return Explained

When someone dies and their estate goes through probate in Maryland, the estate itself can generate income while it is being administered — dividends from investment accounts, rent from a property, interest on savings. That income is taxable, and it is taxable at the estate level before any of it reaches the heirs.

Maryland Form 504 is the fiduciary income tax return that captures this. It is separate from the Maryland Estate Tax Return (Form MET-1), separate from the decedent's final personal income tax return, and separate from any inheritance tax obligations at the Register of Wills. Executors who are unfamiliar with fiduciary tax filing often miss it entirely, which creates problems when the Comptroller eventually notices taxable income that was never reported.

What Maryland Form 504 Is

Form 504 is the Maryland Fiduciary Income Tax Return. It is filed by the fiduciary — the executor or administrator of an estate, or the trustee of a trust — on behalf of the entity itself.

The concept behind it is straightforward: during the period when an estate is open and being administered, the assets in the estate may produce income. A brokerage account generates dividends. A rental property produces rent. A money market account earns interest. That income belongs to the estate, not yet to any individual heir, and the estate must report and pay Maryland income tax on it.

The federal equivalent is Form 1041 (the U.S. Income Tax Return for Estates and Trusts). Form 504 is Maryland's counterpart at the state level.

Who Must File Form 504

A Maryland fiduciary income tax return is required if the estate or trust:

• Had Maryland taxable income of more than $300 during the tax year, or
• Had gross income of $300 or more and was required to file a federal Form 1041

The $300 threshold is intentionally low. An estate with a modest savings account earning $400 in interest over the course of administration crosses the filing threshold. If the estate includes an investment portfolio, rental property, or any business interest, it almost certainly generates enough income to require filing.

Estates of nonresidents who owned Maryland property also have a Form 504 filing obligation if they earned Maryland-sourced income.

What Income Is Reported on Form 504

Form 504 captures income the estate earns after the date of death and before assets are distributed to heirs. This includes:

• Interest income from bank accounts, money market funds, or bonds held by the estate
• Dividend income from stocks in the decedent's name that have not yet been transferred to heirs
• Rental income from real property that passes through probate and is managed by the executor during administration
• Capital gains from the sale of estate assets (such as selling a house or liquidating a brokerage account during probate)
• Business income if the decedent owned a sole proprietorship or partnership interest that generates income during administration

Income the decedent earned before death goes on their final personal income tax return (Form 502 at the state level, Form 1040 federally). Income earned after death by the estate goes on Form 504.

The Deduction for Distributions to Beneficiaries

One of the most important mechanics of fiduciary income taxation is the distribution deduction. When an estate distributes income to a beneficiary, the estate deducts that amount from its own taxable income — and the beneficiary picks it up on their personal return instead.

This pass-through works because the income only gets taxed once: either at the estate level (if retained in the estate) or at the beneficiary level (if distributed out). The executor controls timing of distributions, which can have real tax consequences for beneficiaries depending on their personal income tax situations. If a beneficiary is in a lower bracket than the estate, distributing income to them rather than retaining it at the estate level reduces the combined tax bill.

This deduction mechanics is one reason a CPA familiar with fiduciary taxation is genuinely useful for estates with substantial investment portfolios or rental property.

Filing Deadlines for Form 504

Maryland Form 504 follows the same general timetable as federal Form 1041:

• Calendar year estates and trusts: Due April 15 of the year following the tax year
• Fiscal year estates and trusts: Due on the 15th day of the 4th month after the end of the fiscal year

An estate can choose its own fiscal year when it is opened — the first tax year runs from the date of death through the end of the chosen fiscal year, which can be any 12-month period. Choosing a fiscal year that does not align with the calendar year can provide some administrative flexibility and allow the estate to stay open longer on the same tax filing cycle.

An extension is available. Maryland generally aligns with the federal automatic extension — file a timely extension request (Form 504E) and you receive additional time to file, though not to pay any tax owed.

How Form 504 Differs From the Maryland Estate Tax Return

These are two different taxes assessed by two different agencies. Confusing them is common.

Form MET-1 is the Maryland Estate Tax Return. It is filed with the Comptroller of Maryland when the gross value of the decedent's estate exceeds the $5 million state exemption. It is a one-time filing triggered by the size of the estate at death. It is a tax on the transfer of wealth from the deceased person to their heirs.

Form 504 is the Fiduciary Income Tax Return. It is also filed with the Comptroller of Maryland, but it covers income the estate earns during administration — an ongoing obligation that repeats annually for as long as the estate remains open and has taxable income.

An estate can owe both. An estate worth $6 million at death owes estate tax on the $1 million above the exemption (filed on MET-1). If that $6 million estate also holds rental property that generates $40,000 in rental income while probate is open, Form 504 must also be filed for each year that income is earned.

Neither of these is the same as the Maryland inheritance tax, which is collected by the Register of Wills and is assessed against individual beneficiaries based on their relationship to the decedent.

Practical Triggers That Indicate Form 504 Is Required

In practice, these are the situations that most reliably create a Form 504 obligation:

Investment accounts in the estate: If the decedent held a taxable brokerage account in their sole name, dividends and interest will continue to accrue in the estate's name until the account is liquidated or transferred. Once the estate obtains an employer identification number (EIN) from the IRS and retitles the account into the estate's name, the brokerage will issue a 1099 showing the estate as the account holder. That 1099 triggers the Form 1041 and Form 504 obligations.

Sale of real estate during probate: Selling the family home to settle the estate typically generates a capital gain (or loss) depending on the stepped-up basis at death. The sale proceeds, minus the stepped-up cost basis, become taxable income reported on Form 504.

Rental property: If the decedent owned rental property that the executor continues to lease out during administration, the net rental income must be reported on Form 504 each year the estate is open.

Delayed estate administration: The longer an estate stays open, the more tax years it potentially spans. An estate opened in October 2025 and not closed until February 2027 will have at least two years of potential Form 504 filing obligations.

Getting the EIN and Opening the Estate's Tax Account

Before you can file Form 504, the estate must have its own federal Employer Identification Number (EIN). This is separate from the decedent's Social Security number. Apply for the EIN through the IRS (Form SS-4 or the IRS online EIN application tool — results are immediate online). The estate's EIN is used on all tax filings, on the estate's bank account, and on any financial accounts retitled into the estate's name.

Once the EIN is in place, the executor is responsible for tracking all income and expenses through the estate's bank account, maintaining records for every disbursement and receipt, and providing accurate data to the CPA or tax preparer at year-end.

When You Should Hire a CPA

The complexity of Form 504 scales directly with the complexity of the estate's income. If the estate has only a small checking account that earned $75 in interest and you distributed everything within one tax year, you may be below the threshold and have no filing obligation at all.

But if the estate includes a brokerage account with stocks you are liquidating over several months, a rental property, or retirement accounts with income implications for beneficiaries, the intersection of Form 504 with the federal Form 1041, the decedent's final personal return, and any potential MET-1 filing is where real errors occur. A CPA with fiduciary tax experience should be engaged for any estate generating meaningful income during administration.

The Maryland Probate Process Guide covers the full timeline of estate administration in Maryland — including when income tax obligations arise, what accounts and records to maintain during the process, and how to coordinate the fiduciary return with the other tax filings required during estate settlement.

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