Note: The editors of Kiplinger's Personal Finance magazine and the Kiplinger Tax Letter are answering questions about the new tax law from subscribers to our free Kiplinger Today daily email. See other reader Q&As about the new tax law, or submit your own question.
Question: Now that the trust and estate tax rates apply for the kiddie tax, is there any break for long-term capital gains and qualified dividends?
Answer: Yes. The kiddie tax now uses the trust and estate rates – rather than the parents’ tax rate – to tax unearned income in excess of $2,100 earned by a child under age 19 or, if the child is a full-time student, under age 24. The trust and estate rates on ordinary income range from 10% to 37%, with the top bracket starting at just $12,500.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Long-term gains and qualified dividends are taxed at 0% when income (including the gains and dividends) is under $2,600 and 20% when income exceeds $12,700. In between those amounts, the rate is 15%. Also, note that for kiddie tax purposes, the 3.8% surtax on net investment income hits income over $12,700.
-
IRS Tax Refunds Are $526 Bigger This Year: Here's WhyTax Refunds Inflation-related changes to the tax code could result in a larger refund.
-
Retire in Costa Rica With These Three Tax BenefitsRetirement Taxes Costa Rica may be a good place for retirement if you like the low cost of living and savings for your heirs.
-
Ten IRS Audit Red Flags for Self-Employed IndividualsIRS Audits Taxpayers who file Schedule C with their Form 1040 have a greater chance of an IRS audit.
-
Trump Wants You Out of the IRS, But You'll Have to Wait Until MayIRS Some IRS employees won’t be able to resign using the buyout offer until the end of tax season.
-
Are Tips Taxable in 2025? Understanding the IRS RulesTaxable Income With all the recent talk about ending federal taxes on tips, some wonder whether tips are taxable income.
-
Key Family Tax Breaks Are on the GOP Chopping Block This YearTax Credits Several tax breaks, including the Child Tax Credit, may face reforms or be cut entirely as lawmakers seek revenue for Trump’s tax plans.
-
What's Going on With New Jersey Property Tax Programs?Property Tax ANCHOR and ‘Senior Freeze’ just got a refresh, and there’s a new program: Stay NJ. Learn how to save on New Jersey property taxes.
-
States That Won't Tax Your Retirement Income in 2025Retirement Taxes Several states don’t tax Social Security benefits, 401(k)s, IRAs, and pensions. But you may still have to pay state taxes on some incomes.
