Kiddie tax is a federal tax on a child’s unearned Income .
Sec. 1(j)(4) of Internal Revenue Code regulates the kiddie tax .
Conditions for Kiddie
1.Age of child should be less than 18 years
2.Unearned income of child is more than $2,200 for Tax Year 2019 ( $2,100 for 2018).
3.The Child should not have fileed a joint tax return.
4.At least one of his/her parents must be alive by the end of tax year
It is simple. Income that is not earned by a Kid , but that accrues to him/her. Examples are :
interest, dividends, or capital gains distributions, or taxable pension payments, rents, royalties, or income from custodial accounts or property, even if the property was purchased with a child’s wages or given as a gift, or taxable social security benefits, taxable scholarship , fellowship grants not reported on Form W-2, unemployment compensation, alimony, andany other income not earned by working income from a trust unless it is a qualified disability trust..
How to Compute
Step 1: Find Gross Unearned income by adding all unearned income.
Step 2: Deduct basic exemption of $2,200 for Tax Year 2019. This gives you Taxable Unearned income
What tax bracket
applies to Kiddie Tax
Tax bracket for 2019 is
Up to $2,600 10% $2601 to $9,300 24% $9301 to $12,750 35% above $12750 37%
For unearned income other than long term capital gains & dividend
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