The New Kiddie Tax Rules: Back To The Future
Most of the discussion about the Setting Every Community Up for Retirement Enhancement (SECURE) Act focuses on how the law expands retirement plans and ends the Stretch IRA. But there are some other important provisions in the law that haven’t received much attention.
One significant change in family income tax planning in the SECURE Act is the reversal of the Kiddie Tax rules.
The Kiddie Tax is a series of provisions that determine how unearned (investment) income of people under age 19 is taxed. The Kiddie Tax was overhauled in the Tax Cuts and Jobs Act (TCJA) enacted late in 2017. For many years the investment income of youngsters (over a certain amount) was taxed at their parents’ highest marginal tax rate. The TCJA changed the rules for 2018 and later years so that the unearned income of youngsters was taxed without reference to their parents’ tax rates. Instead, youngsters used the tax table for trusts and estates.
One of the problems with the TCJA rules was that...
Story courtesy of Forbes
February 26, 2020