What is the “Kiddie Tax”?

Effective January 1, 2008, so-called “Kiddie Tax” rules pertaining to a child’s investment income were changed. The age limit for this tax increased to include children who are 18 or younger and full-time students over 18 but under age 24. Investment income greater than a specified annual amount for a child affected by the kiddie tax is taxed at the marginal tax rate of the child’s parents.

Exceptions apply for children with paid jobs that provide a large portion of their support. More information can be found in IRS Publication 929, “Tax Rules for Children and Dependents.” This publication and the forms are available on the IRS Web site at www.irs.gov under “Forms and Publications.” You may also order them by calling the IRS toll free at 1-800-TAX-FORM (1-800-829-3676).

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