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    2011 Tax Year

Introduction to the Kiddie Tax

The "kiddie tax" was designed by Congress to put the brakes on high-income households funneling unearned income through the kids to reduce their overall taxes.

The tax is applied to child's unearned income of more than $1900. The first $950 reported on your return is tax free, while the second $950 is taxed at the child's rate (usually around 15%). Any amounts over that get dinged at the parents' income tax rate.

In 2012, the kiddie tax may come under increasing scrutiny. Congress has already sent signals that it is wanting to raise the income tax on all amounts earned by children (not just those amounts over $1900).

The kiddie tax only applies to unearned income, not income earned by the child through part-time or full-time employment. Unearned income can include stock and mutual fund dividends, interest payments, etc.

The tax is triggered through IRS Form 8615, which must be filed if any children receive investment income greater than $1900 in any given year.

Download IRS Form 8615 for more information on the Kiddie Tax.


All information is believed accurate at time of transmission, and no tax advice is implied. Always consult your tax professional if you have questions.

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