Question: What is the Kiddie Tax Rate?
The kiddie tax applies when children earn more than $1,900 on their interest plus dividends plus other investment income. If children earn more than that, part of their income will be taxed at the parent's tax rate instead of the child's tax rate.
Answer: To calculate the general kiddie tax rate, use the following 2010 rates:
- Child Tax Rate. The first $1,900 of the child's investment income (less their standard deduction) will be taxed at the child's tax rate, which is usually 10%.
- Parents Tax Rate. The remaining investment income is taxed at the parent's tax rate when the investment income is added to the parents income.
For examples, and step by step instructions to calculating the kiddie tax rate, see IRS publication 929.
Report the kiddie tax rate using one of two kiddie tax forms.
You can compute the kiddie tax rate for free using CompleteTax.
