Tax on a child’s investment income, at the parent’s rate above $2,700
Updated October 2026
On Form 8615: 1. The child’s standard deduction is the greater of $1,350 or earned income plus $450 (2026). 2. Net unearned income is unearned income minus $2,700 (if the child does not itemize), but not more than taxable income. 3. Net unearned income is taxed at the parent’s rates; the rest of the child’s taxable income at the child’s own rates.
Worked example. $6,000 of dividends and interest, no job, parent in the 22% bracket. Standard deduction $1,350; taxable income $4,650. Net unearned income: $6,000 − $2,700 = $3,300, taxed at 22% = $726. The other $1,350 is taxed at the child’s 10%: $135. Total $861. Without the kiddie tax the whole $4,650 would have been taxed at 10%, $465.
| Child’s unearned income | Treatment (2026) |
|---|---|
| First $1,350 | Covered by the child’s standard deduction: no tax |
| Next $1,350 ($1,351-$2,700) | Taxed at the child’s rate (10% at most levels) |
| Above $2,700 | Taxed at the parent’s rate (Form 8615) |
| Form 8814 election | Allowed if the child’s income is only interest and dividends, more than $1,350 and less than $13,500 |
These are the amounts in Revenue Procedure 2025-32 (October 9, 2025); they are the same as for 2025.
A child who at the end of the year was under 18; or 18 with earned income not more than half of their own support; or a full-time student aged 19 to 23 with earned income not more than half of their support; who has unearned income over $2,700, has at least one living parent, and does not file a joint return. Earned income from a job is never subject to the kiddie tax; it is taxed at the child’s rates and raises the child’s standard deduction.
Unearned income includes interest, dividends, capital gains (including gains in a custodial UTMA or UGMA account), taxable scholarship amounts not reported on a W-2, and certain trust distributions. Enter the part that is qualified dividends or long-term gains separately so it is taxed at capital-gain rates. The parent’s rate is the top bracket on the return of the parent whose taxable income is higher (or the custodial parent if not married to each other).
| Child (2026) | Net unearned income | At parent’s rates | At child’s rates | Total (Form 8615) | Parents’ extra tax with Form 8814 |
|---|---|---|---|---|---|
| Age 14, $6,000 of dividends (ordinary), parent at 22% | $3,300 | $726 | $135 | $861 | $861 |
| College student, $4,000 of interest, parent at 24% | $1,300 | $312 | $135 | $447 | $447 |
| Age 12, $12,000 of interest, parent at 32% | $9,300 | $2,976 | $135 | $3,111 | $3,111 |
| Age 16, $5,000 summer job plus $4,000 of interest, parent at 22% | $1,300 | $286 | $225 | $511 | Not allowed |
| Age 10, $2,500 of interest | $0 | $0 | $115 | $115 | $115 |
| Age 15, $20,000 of qualified dividends, parent at 24% / 15% | $17,300 | $2,595 | $0 | $2,595 | Not allowed |
A summer job raises the child’s standard deduction to $5,450, so the child in row four has taxable income of only $3,550 and net unearned income of $1,300. Qualified dividends are taxed at the parent’s capital-gain rate, not the ordinary bracket.
Form 8814 puts the child’s interest and dividends on the parents’ return and skips a separate return for the child. The tax is usually the same or slightly higher, and the added income raises the parents’ AGI, which can reduce credits and deductions tied to AGI, increase IRMAA or ACA premiums, and push the parents over income limits. It is not allowed if the child had earned income, capital gains other than distributions, estimated tax payments or withholding.
UTMA and UGMA custodial accounts are the most common source of kiddie tax because the income belongs to the child. A 529 plan grows tax-free with no kiddie tax as long as withdrawals pay for education. Trump Accounts grow tax-deferred until the year the child turns 18, so they generate no current income for the kiddie tax either.
Form 8615 actually refigures the parent’s tax with the child’s net unearned income added (and adds siblings’ net unearned income together); this calculator uses the parent’s marginal rate instead, which is exact unless the extra income crosses a bracket. It ignores state taxes, the net investment income tax, itemized deductions and capital losses. For several children with investment income, or income near a bracket edge, use tax software or a professional.
Using the child’s rate for everything. Income above $2,700 uses the parent’s rate. Forgetting UTMA capital gains when the account sells investments. Electing Form 8814 when the child had a job. Not allowed. Ignoring the AGI effect of Form 8814 on the parents’ credits. Assuming college students are exempt. The rule reaches full-time students up to 23.