What the kiddie tax does
The Instructions for Form 8615 state the rule: a child's unearned income over the threshold is taxed at the parent's rate if the parent's rate is higher than the child's. The first part of the income is untouched, the next part is taxed at the child's own rate, and only the net unearned income above that is taxed the parent's way. Wages and other earned income are never part of it.
Rev. Proc. 2025-32 sets the $1,350 amount for 2026, the same figure used for a dependent's minimum standard deduction, which is why the threshold is twice it.
Who it applies to
| Child at the end of the year | Kiddie tax applies if |
|---|---|
| Under 18 | unearned income over $2,700 |
| Age 18 | and earned income was not more than half of the child's own support |
| Full-time student aged 19 to under 24 | and earned income was not more than half of the child's own support |
In every case at least one parent must have been alive at the end of the year, the child must be required to file a return, and the child must not file a joint return, per Topic 553. Unearned income, in the Form 8615 instructions, is generally all income other than salaries: taxable interest, dividends, capital gains, rents, royalties, pensions and annuities, taxable scholarships not reported on a W-2, unemployment compensation, alimony, the taxable part of Social Security and income received as a trust beneficiary.
How much is taxed at the parent's rate
| Child's unearned income, no earned income, no itemizing | Not reached by the kiddie tax | Net unearned income at the parent's rate |
|---|---|---|
| $1,000 | $1,000 | $0 |
| $2,700 | $2,700 | $0 |
| $4,000 | $2,700 | $1,300 |
| $6,000 | $2,700 | $3,300 |
| $10,000 | $2,700 | $7,300 |
| $20,000 | $2,700 | $17,300 |
The second column is not all tax free: roughly the first $1,350 is covered by the child's standard deduction and the next $1,350 is taxed at the child's own rate. At $20,000 of dividends, $17,300 is taxed as though it were the parent's income, at the parent's bracket from federal income tax brackets 2026 The dividend calculator and compound interest calculator show how quickly an account in a child's name reaches the threshold.
The Form 8814 election
Instead of the child filing with Form 8615, a parent may report the child's income on the parent's own return on Form 8814 if, per Topic 553 and Rev. Proc. 2025-32:
- the child was under 19, or under 24 and a full-time student, at year end;
- the child's only income was interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends;
- the child's gross income was more than $1,350 and less than $13,500 for 2026;
- no estimated payments were made for the child, no prior-year overpayment was applied to the child's number, and there was no backup withholding;
- the child is required to file absent the election and does not file jointly, and the parent is the qualified parent or files jointly with the child's other parent.
The election saves a return but adds the income to the parent's adjusted gross income, which can move other figures that depend on it.
Related rules
- Net investment income tax. Topic 553 notes a child may also owe the 3.8 percent tax on the lesser of net investment income or income over the threshold, figured on Form 8960.
- Alternative minimum tax. For 2026 a child subject to the kiddie tax has an AMT exemption no larger than earned income plus $9,750, per Rev. Proc. 2025-32; alternative minimum tax 2026 covers the AMT itself.
- Education accounts. Earnings inside a 529 plan are not taxed each year and so do not count toward the threshold; gifts that fund a child's account are measured against the $19,000 exclusion in gift tax 2026.
This guide follows IRS Topic 553, the 2025 Form 8615 instructions and the 2026 figures in Rev. Proc. 2025-32; the 2026 forms govern 2026 returns.
Frequently asked questions
What is the kiddie tax?
A rule that taxes a child's unearned income above a threshold at the parent's tax rate when the parent's rate is higher, so that investment income cannot be shifted to a child to be taxed at the child's lower rate. The Instructions for Form 8615 state it as unearned income over $2,700 being taxed at the parent's rate if that rate is higher than the child's. It applies to interest, dividends, capital gains and most income other than wages.
Who does the kiddie tax apply to?
Per IRS Topic 553, a child who at the end of the year was under 18; or was 18 with earned income not more than half of their own support; or was a full-time student aged 19 to under 24 with earned income not more than half of their support. At least one parent must have been alive at year end, the child must be required to file a return, and the child must not file a joint return.
What is the kiddie tax threshold for 2026?
Rev. Proc. 2025-32 sets the 2026 amount used to reduce a child's net unearned income at $1,350. Net unearned income is unearned income minus the larger of $2,700 or $1,350 plus itemized deductions directly connected to producing the income, so for a child who does not itemize the first $2,700 of unearned income is outside the kiddie tax and the rest is taxed at the parent's rate.
Can I put my child's investment income on my own return?
Yes, under the Form 8814 election, if the child was under 19 or a full-time student under 24, had only interest and dividend income including capital gain distributions, and had gross income more than $1,350 but less than $13,500 for 2026, among other conditions in Topic 553. The child then files no return of their own; including the income on the parent's return can raise the parent's adjusted gross income and affect other items that depend on it.
Do 529 plans and custodial accounts trigger the kiddie tax?
A 529 plan's earnings are not taxed while in the account and are tax free when spent on qualified education, so they do not produce yearly unearned income for the child. Interest and dividends the child receives, such as from an account held for the child, are unearned income under the Form 8615 definition and count toward the threshold.
Sources
- IRS Rev. Proc. 2025-32 (for 2026 the amount used to reduce net unearned income is $1,350; the parental election requires gross income more than $1,350 but less than $13,500; the AMT exemption for a child subject to the kiddie tax may not exceed earned income plus $9,750)
- IRS Topic no. 553, Tax on a child's investment and other unearned income (kiddie tax) (the age tests; at least one parent alive; the child required to file and not filing jointly; Form 8615; the Form 8814 parental election and its conditions; the net investment income tax)
- IRS Instructions for Form 8615 (2025) (unearned income over $2,700 taxed at the parent's rate if higher; who must file; what counts as unearned income; net unearned income as unearned income minus the larger of $2,700 or $1,350 plus directly connected itemized deductions)
General information based on the sources above, not tax, legal or financial advice.