Who Does the Kiddie Tax Apply To?
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Children under Age 18
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Children Age 18 at end of Year (with Earned Income less than ½ of Support)
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Full Time Student over Age 18 and under Age 24 (with Earned Income less than ½ of Support)
Special rules apply for computing the tax on certain unearned income of a child meeting one of the age parameters listed above:
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Child’s interest, dividends, and other unearned income total the “earned income limit” (see Table 1) or less: The child’s income is taxed at the child’s tax rates.
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Child's interest, dividends, and other unearned income total more than the “earned income limit” (see Table 1): Part of that income may be taxed at the parent's tax rate instead of the child's tax rate., The computation of that tax is done on a return filed for the child.
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Election by parent(s): A child's parent(s) may be able to choose to include the child's interest and dividend income (including capital gain distributions) on the parent's return rather than file a return for the child. If the child has income other than interest, dividends and capital gain distributions, this election is not allowed.
Caution
If a child meets these requirements, the child is subject to the Kiddie Tax regardless of whether or not he/she qualifies as a dependent. A child can be a legally adopted child and a stepchild. If neither parent is alive on the last day of the child’s tax year, the child’s tax is determined at his/her own rate and the Kiddie Tax rules don’t apply.