What is

Kiddie Tax?

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

Tax Application?

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


What is

Unearned Income? 

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

Unearned Income? 

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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