kiddie tax

Kiddie tax

Tax owed for the investment income of children if the amount is more than $1,400.

Kiddie Tax

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.

kiddie tax

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.
References in periodicals archive ?
Exhibit 1 If the parents are: Kiddie tax applied to each child is determined by: Married filing jointly Using parents' taxable income Married filing separately or not Parent with higher taxable married and living together the income entire year Married not living together Using the custodial parent's taxable income Custodial parent with stepparent Treating stepparent as the other parent
Therefore, this income-shifting strategy might have its greatest payoff after children leave school or reach age 24, when the kiddie tax won't apply.
Under the kiddie tax rules for 2012, the investment income of a child (1) who is under the age of 18, regardless of the amount of the child's earned income, or (2) whose earned income does not exceed one-half of the child's support and who is either age 18, or age 19-23 and a fulltime student, is taxed at the parents' marginal tax rate to the extent such income exceeds $1,900 (Sec.
The kiddie tax was instituted to discourage wealthy parents from shifting their investment income to their children in lower tax brackets.
This may spread out income, possibly avoid (or lessen) the kiddie tax and eliminate assets and income from financial aid consideration.
Secondly, the earnings currently are taxed at the parents marginal tax rate under the kiddie tax rules.
Children under age 18 are subject to the kiddie tax.
Pursuant to the Small Business and Work Opportunity Tax Act of 2007, however, the kiddie tax applies to children under age 19 or full-time students under age 24 starting in 2008 (see also IRS Publication 929, Tax Rules for Children and Dependents, and 17, Your Federal Income Tax--Part One 1.
In addition to the taxpayer's business and investment items, a number of items found on individual returns were included: the kiddie tax, the sale of a principal residence, the tax on excess individual retirement account contributions, rental income from a vacation home and the nanny tax.