The “kiddie tax” applies to children up to age 18 and could apply to children up to age 23—depending on how much earned income they have and whether or not they are full-time students. In 2017, children with investment income above a certain amount may have had part or all of their investment income taxed at their parents’ income tax rate. The “kiddie tax” will continue to apply if the child’s total investment income exceeds $2,100 in 2018, but the tax rate is changing. Earnings more than this amount will be taxed at the trust and estate tax rates. Those rates for 2018 are:
- 10% of income up to $2,550,
- 24% up to $9,150,
- 35% up to $12,500 and
- 37% for any income more than $12,500.
These changes are reflected in the March AAII Journal Tax Guide Update
You can keep up-to-date with the 2018 tax reform changes here at the AAII Blog.