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5 Cards in this Set
- Front
- Back
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What is the purpose of kiddie tax |
It prevents ppl from avoiding taxes on their investment income by transferring the investments into the names of their children who might not be taxed or are taxed at lower rates. |
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A childs (earned or unearned?) income above what thresholds is subject to its. At the trust tax rates? |
UNEARNED INCOME 1. $2,100 OR 2. if greater, $1,050 plus itemized deductions related to the production of unearned income. |
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Who does the kiddie tax apply to? |
Applies to kids who: 1. Has unearned income above 2,100 2. Either parent is alive at the end if taxable year. 3. The child does NOT file a joint return for the year. 4. Child Is under 18 years old, or is 18 years old with earned income that does not exceed 50% of the childs support, or is a student between 19-24 with earned income that does not exceed 50% of the childs support. |
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How do you calculate the kiddie tax of the child has unearned income ONLY |
the first $1,050 is NOT TAXED. The next 1,050 is taxed at the trust tax rate. |
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How do you calculate kiddie tax if child has both earned and unearned income? |
First do: Total income- earned income- 2100 threshold. The resulting amount is subject to trust tax rates
To get the portion that will not be taxed: If earned income less than $1,050, then all of the earned income plus whatever unearned income it takes to reach 1,050 is not taxed. Then, you do 2,100 less the unearned income used above to get the amount of unearned income to be taxed at the childs rate.
If earned Income is MORE than 1,050, then all of earned income plus $350 unearned income is NOT taxed. Then, you so 2,100 less the 350 of unearned income used above to get the amount of unearned income taxed at the childs rate.
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