taxes

The tax joys of parenthood

Taxes » Tax Credits » The Tax Joys Of Parenthood

Beware the kiddie tax
Beware the kiddie tax

One former child-related opportunity to lower your tax bill, however, has been dramatically reduced. Previously, many parents shifted some of their higher-taxed investment income to their young children so that the earnings would be taxed at a lower bracket; for example, falling from a possible 39.6 percent rate to the youngsters' usually 10 percent or 15 percent bracket.

But the so-called kiddie tax limits this practice. When a young investor's 2013 earnings exceed $2,000, the tax rate applied to those excess earnings is the parents' -- not the child's. The higher tax rate remains in place until the child turns 19 or age 24 if the young investor is a full-time student. For 2014 planning purposes, the child's investment earnings limit remains at $2,000.

So, Mom and Dad, keep an eye on young Jimmy's or Jane's assets because you could be paying the taxes on them.

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.28%  0.02 4.26%
15 year fixed, 0 point 3.30% --0.00 3.30%
5/1 ARM 3.35%  0.05 3.30%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.74%  0.01 4.75%
50K FICO-based HELOC 4.53%  0.02 4.51%
100K FICO-based HELOC 4.26%  0.02 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86% --0.00 2.86%
48 month used car loan 2.79% --0.00 2.79%
60 month new car loan 2.94% --0.00 2.94%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.89%  0.00 0.89%
2 Year CD 1.02% --0.01 1.01%
5 Year CD 1.59% --0.00 1.59%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.67%  0.04 15.71%
Cash Back Cards 16.32%  0.04 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us