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Personal Tax5 min readMar 17, 2026
Kiddie Tax: What Parents Need to Know
The 'kiddie tax' prevents parents from shifting investment income to children in lower tax brackets. Here's how it works and how to plan around it.
The Kiddie Tax
What Is the Kiddie Tax?
The Kiddie Tax taxes a child's unearned income at the parent's marginal tax rate, preventing income shifting.
Who It Applies To
- Children under age 18, OR
- Children ages 18 whose earned income doesn't exceed half of their support, OR
- Full-time students ages 19–23 whose earned income doesn't exceed half of their support
2025 Thresholds
- First $1,350 of unearned income: Tax-free (child's standard deduction)
- Next $1,350: Taxed at the child's rate
- Unearned income above $2,700: Taxed at the parent's marginal rate
What Counts as Unearned Income
- Interest and dividends
- Capital gains
- Rental income
- Taxable scholarship amounts
What Doesn't Count
- Wages and self-employment income (earned income)
Form 8615
Children subject to the Kiddie Tax must file Form 8615 with their return (or parents can elect to include on their return using Form 8814).
Planning Strategies
- Invest in growth stocks (no dividends) in custodial accounts
- Use 529 plans for education savings
- Shift income to children over age 24
Have children with investment income? We can help minimize the impact of the Kiddie Tax.