In this episode, Dr. Friday explains the concept of the “kiddie tax,” which applies to unearned income from children’s investment portfolios. She highlights the tax thresholds—$2,300 for minors and full-time students under 24—before taxes apply. Above that amount, income is taxed at the higher rate between the child’s or parents’ tax brackets. Understanding these rules can help families manage taxes on investments for their children.
Transcript:
G’day I’m Dr. Friday, president of Dr. Friday’s Tax and Financial Firm. To get more info, go to www.drfriday.com. This is a one-minute moment.
Kiddie tax. Now most of us don’t really think about taxes for our children, we’re just hoping that their funds grow and they do things. But many times people will start portfolios, after-tax portfolios for their kids, or grandparents will start them, and once that happens you have a minimum you can kind of hit before you start hitting taxes. So basically you have $2,300 that you would do under the age of 18 or under the age of 24 if they’re full-time. Anything above that will be being taxed at either the higher rate of the child themselves if they’re at a higher tax bracket or the parents. Whichever is higher is the tax rate you’re going to pay on those funds.
You can catch the Dr. Friday call-in show live every Saturday afternoon from 2 to 3 p.m. right here on 99.7 WTN.