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2020 Changes to Kiddie Tax

The year 2020 has come with many surprises, but the TCJA has modified tax rates and brackets used to calculate the tax on the unearned income of a child. effective January 1, 2018, the child's tax rate was no longer affected by their parent's tax return or the unearned income of their siblings. Unearned income exceeding the threshold amount of $2,200 will be taxed using the brackets and rates for estates and trusts.

What is the Kiddie Tax requirement?

  • The child had more than $2,200 of unearned income.

  • The child is required to file a tax return.

  • The child was either under the age of 18 on December 31, 2020.

  • Age 18 at the end of 2020 and did not have earned income that was more than half of their support

  • A full-time student at least age 19 or under age 24 on December 31, 2020, and did not have earned income that was more than half of their support.

  • At least one of the child's parents was alive on December 31, 2020.

  • The child does not file a joint return for tax year 2020.

The amount used to reduce the net unearned income reported on the child's return subject to the "kiddies tax" is $1,100. The parent of the child with unearned income may elect to report the income if the child's gross income is less than 2020.

To learn more on how to apply this topic to your upcoming 2020 tax return, contact tax experts such as Direct Point Accountant Firm.


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