Kiddie Tax

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Definition of 'Kiddie Tax'

The Kiddie Tax is a set of rules that apply to the income of children under the age of 18. These rules are designed to ensure that children's income is taxed at the same rate as their parents' income.

The Kiddie Tax applies to unearned income, which is income from sources such as interest, dividends, and capital gains. Earned income, such as wages from a job, is not subject to the Kiddie Tax.

The amount of the Kiddie Tax depends on the child's age and the amount of their income. For children under the age of 18, the first $1,100 of unearned income is tax-free. The next $1,100 of unearned income is taxed at the child's rate, which is the same as their parents' rate. Any unearned income over $2,200 is taxed at the parents' rate.

There are a few exceptions to the Kiddie Tax rules. For example, the Kiddie Tax does not apply to unearned income that is used to pay for the child's education.

The Kiddie Tax can be a complex set of rules, so it is important to consult with a tax professional if you have any questions.

Here are some additional details about the Kiddie Tax:

* The Kiddie Tax applies to children who are under the age of 18 on January 1 of the tax year.
* The Kiddie Tax also applies to children who are 18 or older, but who are full-time students and who are not married.
* The Kiddie Tax does not apply to children who are married and file a joint return.
* The Kiddie Tax is calculated on the child's individual tax return.
* The child's parents can choose to include the child's income on their own tax return, but this is not always the best option.

If you have any questions about the Kiddie Tax, please consult with a tax professional.

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