679 / How is unearned income of certain children treated for federal income tax purposes?
Under certain circumstances, children under the age of 19 (age 24 for students) are required to pay tax on their unearned income above a certain amount at their parents’ marginal rate. (See Q 753 for the current tax rates.) The tax applies to all unearned income, regardless of when the assets producing the income were transferred to the child.
The 2017 Tax Act changed the treatment of unearned income of minors by applying the tax rates that apply to trusts and estates to this income. Under the tax reform rule, which was repealed by the SECURE Act (but see above), (1) earned income of minors was taxed according to the individual income tax rates prescribed for single filers,2 and (2) unearned income of minors was taxed according to the applicable tax bracket that would apply if the income was that of a trust or estate (regardless of whether the income would be subject to ordinary income tax rates or capital gains rates).3
The so-called “kiddie tax” rules apply to children who have not attained certain ages before the close of the taxable year, who have at least one parent alive at the close of the taxable year, and who have over $2,700 in 2025 ($2,600 in 2024, $2,500 in 2023, $2,300 in 2022, $2,200 in 2019-2021 and $2,100 in 2015-2018) of unearned income.4
The kiddie tax applies to: