My Kid Has to Pay a Kiddie Tax?

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If your child received income during the year, then there is a possibility that they will have to pay taxes. The “Kiddie Tax” refers to unearned income, and you may be able to report it on your tax return. If your child has earned income, you still may be able to report it on your return, but they may have to file their own return depending on how much they made and if they’re entitled to a refund.

Unearned Income and the Kiddie Tax

A child’s unearned income can include dividends, taxable interest, capital gains, royalties, rents, or income produced by property belonging to the child. If the total unearned income is under $1,250 for the year, then it is not subject to any tax. A child’s capital losses can be taken into account when totaling unearned income.

If a child’s unearned income is over $1,250 but under $2,500, it can be reported on the parent’s tax return but will be taxed at the child’s tax rate. Any unearned income for the child over $2,500 but under $12,500 can be reported on the parent’s return and will be taxed at the parent’s tax rate—this is known as the kiddie tax.

Age limits do apply to the kiddie tax. They must be under the age of 18 at the end of the year or a full-time student between the ages of 19 and 24 at the end of the year and did not have earned income that was more than half of their own support.

If you your child has more than $12,500 of unearned income, they must file their own separate return.

Earned Income

If your child earned income from working over $13,850, then they should file their own tax return and will be taxed at their own tax rate. If they earned wages but it was under $13,850, they may still want to file because they may be due a refund, especially if taxes were withheld from their paychecks.

Is There a California Kiddie Tax?

In general, a child’s income is taxed in a similar way in California. Double-check with a tax preparer for any differences that may apply.

Yes, your kid has to pay taxes too. We’re here to help you and your child with all of your tax needs. Contact us today.

**Please keep in mind: Tax laws, eligibility requirements and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.