Find out everything you need to know about the kiddie tax and where to look for kiddie tax questions and answers. Find out what the kiddie tax rules are, when they apply, and how the kiddie tax works.
1. Why Was the Kiddie Tax Created?
The history of the kiddie tax began when Congress realized that parents were shifting money to their kids to pay taxes at a lower rate. To avoid the loss of income tax dollars, the kiddie tax was created. While it usually makes sense for parents to give their children stocks to save on taxes at the family level, once the kiddie tax applies, many of the tax savings are no longer available.
2. What is the Kiddie Tax?
If a child's interest plus dividends plus other investment income total more than the kiddie tax limit, part of the child's income will be taxed at the parent's tax rate instead of the child's tax rate. The kiddie tax rules exclude income the child earned from a job or self-employment.3. What is the Kiddie Tax Rate?
If children earn more than the kiddie tax limit, part of their income will be taxed at the parent's tax rate instead of the child's tax rate. The kiddie tax rate will vary depending on the parent's tax rate. To find out the impact the kiddie tax has on your child, you'll need to complete one of the kiddie tax forms.4. How Do I File a Kiddie Tax Return?
Once you find out you are subject to the kiddie tax, here's how to file a kiddie tax return for your children. There are two kiddie tax forms to choose between when filing a kiddie tax return. Your child can either file their own tax return, or you can report your child's income on your tax return.5. Kiddie Tax Limits and Ages
Review the kiddie tax limits and kiddie tax amounts that apply to this tax filing year. The kiddie tax limits can change each year. In addition to the limits, the age at which the kiddie tax applies changes from year to year. The age for the kiddie tax also depends on if your child is a full time student. Full times students, who are your dependents will have a higher age limit than children who are not full time students.6. Other Taxes for Kids
Even if your kids are not subject to the kiddie tax, they may still need to pay taxes on their income and file an income tax return. Find out when your children must start filing tax returns.
To see the impact of the kiddie tax on your own return, you can use CompleteTax to determine the amount of tax due on your child's investment income.
