What is Kiddie Tax?
How Does Kiddie Tax Work?
Let's say John Doe has a son, Jake Doe, who is 16 years old. John gave Jake some Company XYZ stock generates $2,000 of dividends per . Because Jake is a minor and the is more than $1,900, he must pay ordinary income tax on the $100 that is over the limit, and his tax rate is the same rate as his father's tax rate.when he was 6 years old, and now the
Because Jake's income is less than $9,500 a year, John can just include Jake's income on his own tax return instead of having Jake fill out his own return. Children who are under 19 or who are full-time students under 24 do not have to fill out their own tax returns in most cases (they can their income with their parents', though this might increase the parents' tax liability).
Why Does Kiddie Tax Matter?
In theory, the kiddie tax prevents adults from sheltering income.behind minor children by "giving" them or and then having the taxed at the child's lower . Topic 553 discusses the details of tax on a child's