What you should know about kiddie tax. Is your child the next Warren Buffet? As a young boy at the age of 11, Warren Buffet invested the money he earned delivering newspapers into some farmland. He continued to invest and reinvest his money; now he is worth an estimated $85 billion. His parents didn’t have to worry about kiddie tax, but you might.
Special rules apply to the unearned income of certain children. Generally, your child is subject to kiddie tax if the following apply:
• The child is under age 19 by the close of the tax year, or is a full-time student under age 24 with earned income less than half of his or her support;
• The child’s unearned income exceeds a certain inflation-adjusted amount ($2,100 for 2018); and
• The child isn’t married filing a joint return.
Unearned income for purposes of the kiddie tax rules is income other than amounts received as compensation for personal services actually rendered (wages, etc.) and distributions from qualified disability trusts.