Sep 8, 2008
Congress extends childhood when it comes to calculating the kiddie tax. Congress has officially extended childhood to age 18 – at least for purposes of calculating tax on investment income. The “kiddie tax” specifies the age at which children become a separate tax entity from their parents for purposes of calculating tax on investment income. From birth to age 14, children could earn investment income up to two times the standard dependent deduction and be taxed at their tax rate, typically 10 percent. Any investment income over that threshold was taxed at the parents’ presumably higher tax rate. After 14, all investment income was taxed at the child’s lower rate.