Believe it or not the 'Kiddie tax' was actually changed and may likely be lower this year than last. You may not be doing anything wrong.
For 2018 and 2019, the Kiddie Tax was determined by the tax brackets and rates for trusts and estates. Here’s what those work out to:
- The first $2,600 (after the initial $2,200) is taxed at 10%
- The next $6,850 is taxed at 24%
- The next $3,500 is taxed at 35%
- Anything beyond that is taxed at 37%
However, the tax changes for 2020 now make the Kiddie Tax revert back to using the parental rates, instead of the rates for estates and trusts like in 2018 and 2019 above.
Remember that the Kiddie Tax only applies to unearned income in excess of $2,200. Here’s a step-by-step illustration of how a child with $15,000 of unearned income in 2020 would be taxed under the new law:
- Regular tax rates apply to the first $2,200, which is exempt from the Kiddie Tax. The remaining $12,800 is subject to the Kiddie Tax.
- The first $2,600 is taxed at 10%, leaving $10,200 to roll up to a higher rate.
- $6,850 of the $10,200 is taxed at 24%, leaving $3,350.
- The remaining $3,350 is taxed at 35%.
Use this link to confirm your entry and that you did everything correct: How to Report Kiddie Tax
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
