In short
The kiddie tax taxes a child's unearned income above a threshold at the parents' marginal rate, to stop families shifting investment income to children in lower brackets.
Key takeaways
- It applies to children under 18, to 18-year-olds, and to full-time students aged 19 to 23, when their earned income doesn't exceed half their support.
- Earned income, such as wages, is taxed at the child's own rates.
- Parents can sometimes elect to report the child's income on their own return.
Where it's tested
TCP: Individual Tax Planning Strategies — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the 'kiddie tax', a child's unearned income above a threshold amount is generally taxed: