Avoiding the kiddie tax is more important than ever

Description

Abstract: Under the Tax Cuts and Jobs Act (TCJA), the kiddie tax has become harsher for many families: Now, a child’s unearned income is taxed according to the tax brackets for trusts and estates, under which the highest tax rates kick in at far lower income levels. For example, the highest tax rate — 37% — applies when a child’s taxable unearned income tops $12,500. This article explains the kiddie tax and how the TCJA affects it. Two charts display ordinary-income and long-term capital gains tax rates.