How the Kiddie Tax Works
Unearned income is money your child gets from investments, such as bank interest, dividends, or profits from selling stock. Under the IRS kiddie tax rules, this income is taxed in tiers. Wages from a part-time job or babysitting count as earned income, so they stay outside these tiers.
The 2026 Income Tiers
The first tier is covered by the standard deduction for dependents. A standard deduction is an amount of income that isn’t taxed. A dependent is someone, like your child, whom you claim on your tax return.
| Child’s unearned income | How it’s taxed |
|---|---|
| First $1,350 | Tax-free |
| Next $1,350 | At your child’s tax rate |
| Above $2,700 | At your tax rate, if it’s higher |
A Simple Example
Say your child has $4,000 in interest and dividends and no other income. The first $1,350 is tax-free. The next $1,350 is taxed at your child’s rate, and the remaining $1,300 is taxed at your rate.
Who the Kiddie Tax Applies To
The tiers above only kick in when your child meets every condition on this list:
- Their unearned income is more than $2,700.
- They meet one of the age tests below.
- At least one parent is alive at the end of the year.
- They’re required to file a tax return.
- They don’t file a joint return.
Whether your child has to file depends on the rules for dependents, which look at how much and what kind of income they have.
Age Tests
Your child meets the age test if one of these is true at the end of the year:
- They’re under 18.
- They’re 18 and their earned income is no more than half of their own support.
- They’re a full-time student, age 19–23, and their earned income is no more than half of their own support.
Support means the cost of your child’s basic needs, like housing and food. The kiddie tax is one piece of a bigger question about when kids start paying taxes at all.
How to Report Your Child’s Investment Income
If the kiddie tax applies, you have two ways to report the income. Your child can file their own return, or in some cases you can add the income to yours.
Filing Form 8615 With Your Child’s Return
Your child files their own return and attaches Form 8615. This form figures the tax on income above $2,700 using your rate. Your child may also owe the 3.8% net investment income tax, which is figured on Form 8960.
Reporting It on Your Return With Form 8814
You can choose to report your child’s interest and dividends on your own return using Form 8814. If you do, your child doesn’t file a return. You can make this choice if all of these are true:
- Your child is under 19, or under 24 if they’re a full-time student.
- Your child’s gross income, meaning total income before deductions, is less than $13,500.
- Your child’s income is only interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends.
- No estimated tax payments or prior-year overpayments were applied in your child’s name.
- There was no federal income tax withheld from the child’s income.
