The kiddie tax (IRC §1(g)) prevents parents from shifting investment income to their children to take advantage of lower tax rates. A child's unearned income above $2,600 (2025 threshold) is taxed at the parent's marginal rate — not the child's typically lower rate. This applies to children under 19 and full-time students under 24. The first $1,300 is tax-free; the next $1,300 is taxed at the child's own rate.
Child & Parent Information
Kiddie Tax Breakdown (2025)
Disclaimer: This is an estimate based on 2025 kiddie tax rules (IRC §1(g)). It does not account for all individual circumstances, state taxes, or complex earned income tests. Always consult a tax professional before making decisions.
How to Use the Kiddie Tax Calculator
The kiddie tax rules prevent high-income families from reducing their tax bill by shifting investment assets into children's names. Because children typically have no other income, their unearned investment income would otherwise be taxed at very low rates — or not at all. The kiddie tax closes this loophole by taxing unearned income above $2,600 at the parent's marginal rate. This calculator estimates your child's 2025 kiddie tax liability quickly.
Step 1: Enter the Child's Age and Status
Enter the child's age. The kiddie tax applies to children under 19, and to full-time students ages 19–23 who don't earn more than half their own support. Check the "full-time student" box if applicable. Children 19 or older who are not full-time students are generally NOT subject to the kiddie tax, regardless of their investment income.
Step 2: Enter Unearned Income by Type
Enter the child's investment income: interest from savings accounts or bonds, dividends from stocks or mutual funds, and capital gains from investment sales. The total unearned income determines which tiers of the kiddie tax apply. Also enter any earned income (wages, tips) — for students ages 19–23, significant earned income may exempt them from the kiddie tax.
Understanding the Three Tiers
The kiddie tax works in three tiers for 2025: The first $1,300 of unearned income is sheltered by the child's standard deduction (tax-free). The next $1,300 (from $1,300 to $2,600) is taxed at the child's own tax rate — typically 10% or 12% for a child with no other income. Unearned income above $2,600 is taxed at the parent's marginal rate — which can be as high as 37%. Only the Tier 3 amount is the actual "kiddie tax."
Planning Strategies
Common strategies to minimize kiddie tax include: keeping the child's unearned income below the $2,600 threshold, using tax-exempt municipal bonds (interest is excluded), investing in growth stocks that don't pay dividends (capital gains are deferred until sale), contributing to a 529 plan for education (distributions are tax-free), or waiting to sell appreciated assets until the child is no longer subject to kiddie tax rules.
FAQ
Is this kiddie tax calculator free?
Yes, completely free with no signup required. All calculations run locally in your browser — your data is never sent to any server.
What is the kiddie tax?
The kiddie tax (IRC §1(g)) taxes a child's unearned income (investment income like interest, dividends, and capital gains) at the parent's marginal tax rate above a threshold, rather than at the child's typically lower rate. It was created to prevent high-income parents from shifting investment income to their children to take advantage of lower tax rates.
Who is subject to the kiddie tax in 2025?
A child is subject to the kiddie tax if they: (1) have unearned income over $2,600 for 2025, AND (2) have at least one living parent, AND (3) are under age 19, OR are a full-time student under age 24 who did not have earned income exceeding half of their support needs during the year.
What are the 2025 kiddie tax thresholds?
For 2025: The first $1,300 of unearned income is tax-free (protected by the child's standard deduction). The next $1,300 (from $1,300 to $2,600) is taxed at the child's own rate. Unearned income above $2,600 is taxed at the parent's marginal rate. These thresholds are inflation-adjusted annually.
What counts as unearned income for kiddie tax?
Unearned income includes dividends, interest, capital gains, rents, royalties, and similar passive income. It does NOT include wages, salaries, tips, self-employment income, or Social Security. Scholarships and fellowships may be included if not used for qualified education expenses.
Does the kiddie tax apply to full-time college students?
Yes, for students under age 24. However, if a full-time student between ages 19-23 has earned income (wages, salary) exceeding half their support needs for the year, they are NOT subject to the kiddie tax, even if they have significant investment income.
How does the kiddie tax interact with 529 plans?
Qualified distributions from 529 plans for education expenses are not included in income at all — they are tax-free. Only distributions used for non-education purposes are taxable, and those may trigger the kiddie tax if the student is under 24. Contributing to a 529 plan is generally more tax-efficient than a UTMA account for minors.
Is this calculator accurate for tax filing?
This tool provides a solid estimate based on 2025 kiddie tax rules. It does not account for all individual circumstances or state taxes. Always consult a tax professional, particularly for complex situations involving trusts, scholarships, or full-time student status.