Kiddie Tax
Children who earn investment income, including interest and dividends, usually pay a lower tax rate than their parents.
However, once the child’s investment income exceeds $1,800, the child’s income will be subject to the kiddie tax. When the kiddie tax applies, part of the child’s income will be taxed at the parent’s tax rate.
The kiddie tax used to apply to children under age 14. In 2006, Congress expanded it to include children under age 18. In 2008, the kiddie tax includes children under age 19, and dependent, full-time students under age 24.
