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 BasicsWhen 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:
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.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances. AuthorKeana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients. |