Kiddie Tax

To prevent parents from using their children’s tax return to avoid taxes on investment income, Congress established what is now referred to as the kiddie tax on the unearned income of children. This applies to children under the age of 18, those age 18 who did not provide over half of their own support from earned income, and full-time students over age 18 and under the age of 24. The child’s age is determined as of the end of the tax year. Under the kiddie tax rules, a child’s unearned income in excess of $2,100 for 2016 and 2017is taxed at the parent’s tax rate. The child’s earned income continues to be taxed at the child’s rate.