Kiddie Tax now applies to children under age 18

Prior to 2006, children who had not reached age 14 by the end of the tax year were taxed on their unearned income (e.g., interest, capital gains, and dividends) at their parents’ marginal tax rates, if the unearned income exceeded a threshold amount ($1,700 for 2006). In the Tax Increase Prevention and Reconciliation Act of 2005, signed into law on May 17, 2006, the age of 14 was replaced with the age of 18.

 

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