Kiddie Tax
The kiddie tax is a rule that taxes a child's unearned income above a threshold amount at the parents' marginal tax rate, designed to prevent income shifting.
Exam Tip
Kiddie tax applies under 19 (or under 24 if student). First $1,350 tax-free, next $1,350 at child's rate, above $2,700 at parents' rate.
What is the Kiddie Tax?
The kiddie tax requires certain children's unearned income to be taxed at their parents' marginal tax rate.
2025 Thresholds
| Income Level | Tax Treatment |
|---|---|
| $0 - $1,350 | Tax-free |
| $1,351 - $2,700 | Child's rate |
| Over $2,700 | Parents' rate |
Who is Subject?
- Under 19 years old
- 19-23 if full-time student
- Earned income doesn't exceed half of support
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