To keep parents from avoiding taxes on their investments by putting their investments in their children's name, Congress devised the "Tax for Certain Children who have Unearned Income," or the "Kiddie Tax." This video goes into what the "Kiddie Tax" is, who might be subject to it, how the tax works, and the options for reporting Kiddie Tax on a tax return. Computing the "Kiddie Tax" on Form 8615, where the Kiddie Tax is reported on the child's tax return, is reviewed in this video.

2023 UPDATE: For 2023, the Standard Deduction for a dependent is either $1,250 or Earned Income plus $400, whatever is higher. Under the "Kiddie Tax," the first $1,250 in unearned income is not taxed, the next $1,250 is taxed at the child's marginal rate, and unearned income over $2,500 is taxed at the parent's marginal rate.

Introduction: 0:00
What is "Kiddie Tax?" 0:30
How "Kiddie Tax" works: 1:38
One option for reporting "Kiddie Tax" on a tax return: 4:20
Conclusion: 6:23

To learn more about earned vs. unearned income, click here:    • What is Earned Income (and why it's i...  

Taxation of dividends is covered in this video:    • Dividends, Ordinary and Qualified  

Additional Information and Resources:

IRS Publication 929: "Tax Rules for Children and Dependents": https://www.irs.gov/pub/irspdf/p929.pdf

IRS Form 8615: "Tax on Certain Children who have Unearned Income": https://www.irs.gov/pub/irspdf/f8615...

IRS Form 8814: "Parent's Election to Report Child's Interest and Dividends": https://www.irs.gov/pub/irspdf/f8814...

Investopedia: "What Is the Kiddie Tax?": https://www.investopedia.com/terms/k/...

The Tax Geek on The Site Formerly Known as Twitter: @taxgeekusa

The Tax Geek on Reddit: www.reddit.com/r/askataxgeek

Image/Video Sources:

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The images of "Karl", "Dorothy," "Alex," "Melissa," and "Zack" were generated by thispersondoesnotexist.com and any resemblance between this image and any person, living or dead, is coincidental and not intentional.

Intro Music: "Bluesy Vibes" Doug Maxwell YouTube Audio Library

Outro Music: "Modern Attempt" Track Tribe via YouTube Audio Library

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.

The information in this video is current as of date of publication, and is subject to changes.