The holidays are here and the year-end is in sight! Its a good time to think about the “kiddie tax,” the extra levy on
investment income earned by people up to 24 years old. For those making financial gifts to children and grandchildren, these rules present both risk and reason to plan. Congress put in place the kiddie tax to prevent individuals from putting assets in the names of their children who typically have far lower tax rates than their parents. It’s just one more thing to keep in mind when making gifts to children and grandchildren.
Under this tax, a child’s unearned investment income, i.e. – interest, dividends and capital gains which exceeds $2,100 (in 2015) is taxed at the parents’ top rate. The tax applies to children under age 18, and up age 24 if they can be claimed as dependents on the parents’ return.
The first $1,050 of a child’s investment income is exempt from tax. The next $1,050 of investment income is taxed at the child’s rate, which is usually very low or even zero. The tax does not apply to earned income such as wages from a job.
The kiddie tax applies to taxable investment income, so investing in growth stocks which do not pay dividends can help avoid the tax.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Florida Family Trust Company Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.
For more information on Oakstone Law, click here. To get in touch with us, click here to send us an email, or call 239-206-3454. Our office is located at 5137 Castello Drive, Suite 2 in Naples, Florida 34103.