What is the Kiddie Tax?

by TurboTax•78• Updated 2 months ago

The Kiddie Tax applies if your child:

has unearned income (usually from investments) exceeding $2,600
is required to file a return
isn’t filing jointly
is under age 18 (or under age 24 if a full-time student) as of January 1, 2025

Children who only have earned income from a job or self-employment, don’t make enough money to be required to file, or are filing jointly with their spouses are exempt from the Kiddie Tax.

Follow these steps to report your child's income on your return in TurboTax:

Open or continue your return.
Navigate to the child income screen:
- TurboTax Online/Mobile: Go to child income.
- TurboTax Desktop: Search for child income and select the Jump to link.
Answer the questions about your child's income.

What does unemployment compensation mean for the Kiddie Tax?

Unemployment compensation is considered unearned income. A child who receives unemployment compensation may be subject to the Kiddie Tax, and as a result, may pay substantially higher tax than an adult receiving the same compensation.

How is Kiddie Tax calculated?

The Kiddie Tax only applies to unearned income in excess of $2,600.

$0 - $1,300 isn't taxed.
$1,301 - $2,600 is taxed at the child’s tax rate.
Over $2,600 is taxed at the parents’ marginal tax rate.