South Dakota Estate Planning - What Is The Kiddie Tax?

Brooke Swier Schloss
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Estate Planning & Family Law Attorney

The “Kiddie Tax” is a tax on the “unearned” income of a child. In other words, it applies to the child’s income from interest and dividends, but not from wages from a job like their paper route or McDonald’s. The Kiddie Tax has been around since 1986 and applies to the unearned income of a child over a certain small amount. In 2019, that amount is $2,200.

Prior to 2018, if a child had unearned income above that threshold, it would be taxed at the higher of the child’s marginal income tax rate or the parent’s marginal rate. That was bad enough. But, the Tax Cuts and Jobs Act of 2017 taxes the unearned income of the child at the rates applicable to trusts and estates, which for amounts over $12,750 (in 2019) is 37%.

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