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Kiddie Tax

When parents began opening large investment accounts in the name of their children to save money with the lower taxes on the accounts of minors, the government created the Kiddie tax. This tax is applied to investment income of $1,800 or more. Once income is over that amount, the amount over it is taxed by the rates of the parents. The laws for Kiddie taxes have undergone much change in recent years. In 2006, it was applied to those under the age of 14. In 2007, it was raised to 18. It was raised again in 2008, and an addition was made. The age limit of the Kiddie tax for dependent full time students is 24.

Fast Facts

  • This tax is most applicable to parents saving money in college funds, and very wealthy parents.
  • The Kiddie tax does not apply to self-employed minors.

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