Tax Guy: The ‘kiddie tax’ is now easier to calculate, but more expensive for some children

For 2018-2025, the Tax Cuts and Jobs Act (TCJA) revamps the Kiddie Tax rules to tax a portion of an affected child’s or young adult’s unearned income at the rates paid by trusts and estates. Those rates can be as high as 37% or as high as 20% for long-term capital gains and dividends. Before the TCJA, the Kiddie Tax rate equalled the parent’s marginal rate (which for 2017 could be as high as 39.6% or 20% for long-term capital gains and dividends).

The TCJA only changes the Kiddie Tax rate structure. The rest of the Kiddie Tax rules are the same as before.

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