Kiddie Tax Table
| Unearned income | Tax-free | Child’s rate | Parents’ rate |
|---|---|---|---|
| $500 | $500 | – | – |
| $1,350 | $1,350 | – | – |
| $2,700 | $1,350 | $1,350 | – |
| $5,000 | $1,350 | $1,350 | $2,300 |
| $10,000 | $1,350 | $1,350 | $7,300 |
The kiddie tax stops parents from sheltering investment income in a child’s low bracket: in 2026 the first $1,350 of a child’s unearned income is tax-free, the next $1,350 is taxed at the child’s own (low) rate, and everything above $2,700 is taxed at the parents’ marginal rate. This table shows the split at real income levels, and the calculator breaks any amount into its three pieces.
All figures come verbatim from Rev. Proc. 2025-32 - including the parental-election window, which runs from $1,350 up to $13,500 (ten times the shelter) of the child’s gross income.
How to use
- Enter the child’s unearned income (dividends, interest, capital gains) to see the three-way split for 2026.
- Read the table as a planning ladder: a UTMA account yielding under $2,700 a year owes nothing at the parents’ rate.
- Watch the election note: between $1,350 and $13,500 the parents may report the income on their own return instead of filing for the child.
Frequently asked questions
What counts as unearned income for the kiddie tax?
Dividends, interest, capital gains, rents and royalties - income from property. A child’s wages from an actual job are earned income and never trigger the kiddie tax, which is why a teenager with a summer job and a brokerage account has two completely different tax stories.
Why is the tax at the parents’ rate?
Because without it, a family could shift an unlimited brokerage portfolio into the child’s near-zero bracket. The two-tier structure is the compromise: the child keeps a small sheltered amount ($1,350) and a low-rate band ($1,350 more) before the anti-avoidance rule bites.
Can the parents just report the income on their own return?
Sometimes - the parental election (Form 8814) is available while the child’s gross income stays between $1,350 and $13,500 and consists only of dividends, interest and capital gain distributions. It trades a child’s tax return for a small hidden cost: the election can increase the parents’ AGI-linked floors and phase-outs.
At what age does the kiddie tax stop?
Generally the year the child turns 18; it extends through 23 for full-time students if the child’s earned income does not exceed half of their own support. After that, the investment income is the young adult’s own - taxed in their own (usually lower) brackets.