Tax owed for the investment income of children if the amount is more than $1,400.
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A tax on the earnings of a minor child under the age of 18 who earns more than a certain amount in a given year when he/she are not working a paid job. The earnings over and above this amount (which is determined annually) are taxed at the child's parent's or guardian's tax rate. The kiddie tax was created in 1986 to remove the incentive for people to avoid taxes by "giving" stock to their children in a way to make it exempt from taxes. The kiddie tax was introduced in 1986.
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A federal income tax levied on the investment income of children under 14 years of age. Investment income above a specified amount is taxed at the parent's top, or marginal, tax rate. The kiddie tax is designed to make it less advantageous for parents to shift income to their children.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.