What is the Kiddie Tax and Who Qualifies

Family of four walking down a sidewalk, holding hands. Boy in motion, smiling. Wall in the background.

The Kiddie Tax is a set of U.S. tax rules that apply to unearned income. It’s designed to prevent parents from shifting investment income to their children to take advantage of their lower tax rates.

WHO QUALIFIES FOR THE KIDDIE TAX?

A child is subject to the Kiddie Tax if all of the following are true:

1. The child has unearned income over a certain threshold

For 2025, the threshold is $2,600.

The first $1,300 is tax-free (standard deduction).

The next $1,300 is taxed at the child’s rate.

Anything above $2,600 is taxed at the parent’s marginal tax rate.

2. The child meets the age and dependency requirements

The Kiddie Tax applies to a child who:

Age                                                                       Additional Criteria 

Under 18                           Applies automatically if unearned income exceeds the threshold and the child doesn't file a joint return. 

Age 18                               Applies if the child did not earn more than half of their own support through earned income (i.e., wages, salaries).

Ages 19–23                       Applies if: 
                                                   • The child is a full-time student, and
                                                   • The child did not provide more than half of their own support through earned income, and 
                                                   • The child is still claimed as a dependent on the parents’ return. |

2. What Counts as Unearned Income?

UNEARNED INCOME EXAMPLES INCLUDE:

  • Interest
  • Dividends
  • Capital gains
  • Rents
  • Royalties
  • Taxable scholarships (if not for tuition/fees)
  • Earned income (from a job or self-employment) is not subject to the Kiddie Tax.

3. Who is NOT Subject to the Kiddie Tax?

Children over age 23 (unless they are permanently disabled).

Children under 24 who provide more than half their own support with earned income.

Children filing a joint return (usually rare).

Children with only earned income.

4. Criteria                                                                                                                        Criteria Applies?

Child under 18 with > $2,600 unearned income                                                    ✅ Yes

18-year-old with unearned income and doesn't support themselves             ✅ Yes

19–23, full-time student, dependent, and doesn't support themselves          ✅ Yes

24+ or not a dependent                                                                                               ❌ No

Unearned income ≤ $2,600                                                                                         ❌ No Kiddie Tax

Only earned income                                                                                                     ❌ No Kiddie Tax