How much of a child’s unearned income is sheltered, how much is taxed at
their own rate, and how much gets pulled up to the parents’ marginal rate.
Figures current as of July 2026 · Sources: IRC §1(g),
IRS Form 8615 instructions, Rev. Proc. 2025-32
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Common questions
Children under 18. Eighteen-year-olds whose earned income is not more
than half of their support. And full-time students aged 19 to 23 under the same support test.
Aging out is later than most families assume — a student can still be caught at 23.
No. Wages are taxed at the child’s own rate regardless of amount.
Only unearned income — interest, dividends and capital gains — is subject to the kiddie tax.
A summer job does not create exposure.
Growth assets that pay little current income, so the tax lands on
sale rather than annually. 529 plans, which sit outside the kiddie tax entirely. I-bonds,
where interest defers until redemption. And realising gains deliberately up to the threshold
each year, which resets basis at little or no cost. Each involves trade-offs worth discussing
before moving anything.
Sometimes, on Form 8814, if the child’s income is only interest and
dividends and falls under a set limit. It saves filing a separate return but can produce a
higher total tax. Worth comparing rather than assuming.
The child. UTMA and UGMA assets become theirs outright at the age of
majority in your state, to use however they wish. Families are routinely surprised by this, and
it is worth raising well before the balance gets large.
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educational and informational purposes and does not constitute tax, legal, investment or
accounting advice. Using it does not create an advisory or client relationship, and nothing here
is a recommendation or a solicitation.
Results are estimates based on the figures you enter and on simplifying assumptions. This tool
does not model long-term capital gains or qualified dividends at their preferential rates, the
Form 8814 election, the AMT exemption limit for a child subject to the kiddie tax, the net
investment income tax, or any state tax. Tax law changes, and figures reflect published IRS
guidance as of the date shown above.
Confirm every figure with a qualified tax professional before acting on it.
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