The Kiddie Tax Rates Have Changed with the Tax Reform Law?

Did you know:

The Tax Cuts and Jobs Act treats the taxation of earnings inside a child’s Uniform Gift to Minors Account (UGMA) at a different rate than in the past.

Now that you know – here’s what it means!

A child’s investment income in excess of $2,100 for both 2017 and 2018 continues to be subject to what is called the “kiddie tax.” But, the way the investment income is taxed has changed. In the past, earnings subject to the kiddie tax were taxed at the parents’ tax rate. Starting with 2018 returns, the parents’ rate will not matter. Instead, the earnings in excess of $2,100 will be taxed at the rates that apply to trusts and estates.

Taxpayers in any bracket should evaluate their child’s assets producing income in excess of $2,100 to see if moving those assets back to their parents’ custody would impact their tax bill at the end of the year.

And here are the details:

The rates for trusts and estates for 2018 are as follows:

  • Up to $2,550 – 10%
  • $2,250 to $9,150 – 24%
  • $9,150 to $12,500 – 35%
  • Over $12,500 – 37%

The kiddie tax applies to investment income of children under the age of 19 or age 24 if he or she is a full-time student. This new law will allow each child’s return to be completed without having to wait on completion of the parents’ return.

Need help understanding how these changes will impact your individual situation? Start Here.

The knowledge doesn’t end here. Check back each month for new content that will include industry trends, thoughtful advice, and details about how BerganKDV and our team of experts can be the resource you need. If you’re looking for professional services the Midwest way, start here!

CATEGORIES: Featured | Tax & Audit
TAGS: | |
Notify of

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inline Feedbacks
View all comments


Let us know a little about yourself! We’ll deliver timely news straight to your inbox.