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4 ways to cut down kiddie tax

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in Small Business Tax

Now the “kiddie tax” is all grown up.

Alert: The new Tax Cuts and Jobs Act (TCJA) changes the way that the kiddie tax is calculated, beginning in 2018. The revised rules will frequently produce a bigger tax than the amount that would have been owed under prior law.

Nevertheless, you can cut kiddie tax down to size with some astute tax planning.

Here’s the whole story: Under prior law, the kiddie tax applied to “unearned income” (i.e., investment income) above a specified annual threshold that was received by a dependent child under age 19, or a full-time student under age 24. Any excess unearned income above the threshold was taxed at the top tax rate of the child’s parents, regardless of the source of the income.

The kiddie tax threshold for 2017 was $2,100, while the top ordinary income tax rate for parents was set at 39.6%.

The TCJA changes the methodology used to figure out the kiddie tax. The tax calcul...(register to read more)

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