What Is the Kiddie Tax?

The kiddie tax is a rule that taxes a child's unearned income above a threshold at the parent's marginal tax rate, preventing parents from shifting investment income to their children to exploit lower rates. Under current rules, a child's unearned income — such as dividends, interest, and capital gains — above $2,500 (in 2024) is taxed at the parent's rate rather than the child's lower rate. The rule applies to children under 19 and full-time students under 24 who have at least one living parent and whose earned income doesn't exceed half of their support. Earned income like wages from a part-time job is not affected by the kiddie tax — that income is always taxed at the child's own rate. The kiddie tax is calculated on Form 8615 and attached to the child's tax return; in some cases, parents can elect to include the child's income on their own return using Form 8814.