January 5, 2009
In 2008 the “Kiddie” tax rules apply to a child’s unearned income over $1,800 until the child is 18. The child is taxed at the parent’s tax rate if the parents have a higher tax rate than the child. For 2008, the kiddie tax rules also apply to children who are 19 years or older or who are full-time students over age 18 but under age 24. The new provision applies only to children whose earned income does not exceed one-half of their support. Scholarships are not counted in the support test.
We will provide you guidance in the filing instructions for your tax return or separate estimated payments on how to comply with these new requirements if they are applicable to your situation.