Kiddie Tax Changes

In December 2017, Congress enacted the Tax Cuts and Jobs Act (TCJA) and changed how your children calculate their tax on their investment-type income. The TCJA changes led to much higher tax bills for many children.


On December 19, 2019, Congress passed a bill that the president signed into law on December 20, 2019 (Pub. L. 116-94). The new law repeals the kiddie tax changes from the TCJA and takes you back to the old kiddie tax rules, even retroactively if you so desire

Kiddie Tax Basics

When your children are subject to the kiddie tax, it forces them to pay taxes at a higher rate than the rate they would usually pay.
Here’s the key: the kiddie tax does not apply to all of a child’s income, only to his or her “unearned” income, which means income from:

• dividends,
• rent,
• capital gains,
• interest,
• S corporation distributions, and
• any type of income other than compensation for work.

For 2019, your child pays the kiddie tax only on unearned income above $2,100. 

If you need help strategizing around kiddie tax, like who pays it, and the many choices you may have now under Secure Act.  Contact us, we are subject matter experts and will walk you through this.