Kiddie Tax: 2026 Thresholds and How It Works
Last updated 06/09/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
The kiddie tax is a rule that taxes a child’s unearned income above an annual threshold at the parents’ higher tax rate instead of the child’s lower rate.
It exists to stop families from shifting investments to children to dodge taxes.
- What it taxes: Unearned income such as interest, dividends, and capital gains, not wages.
- The 2026 threshold: Unearned income above $2,700 is taxed at the parents’ marginal rate.
- Who it applies to: Most children under 19, and full-time students under 24.
- The form: Reported on IRS Form 8615, attached to the child’s return.
A custodial account in a child’s name once looked like an easy tax shelter. The kiddie tax closed that door by treating a child’s investment income as if the parents had earned it.
What the kiddie tax applies to
The kiddie tax applies only to a child’s unearned income, which is money from investments rather than work. Wages from a job are taxed at the child’s own rate and are not subject to the rule.
According to the IRS, unearned income includes interest, dividends, capital gains, rents, and royalties. Earned income from a part-time job or self-employment falls outside the kiddie tax.
How the 2026 thresholds work
For 2026, a child’s unearned income is split into three tiers, and only the top tier is taxed at the parents’ rate. The first slice is tax-free, the next is taxed at the child’s rate, and the rest is taxed at the parents’ marginal rate.
| 2026 unearned income | How it is taxed |
|---|---|
| First $1,350 | Tax-free (covered by the child’s standard deduction) |
| Next $1,350 (up to $2,700) | Taxed at the child’s own rate |
| Above $2,700 | Taxed at the parents’ marginal rate |
A child with $5,000 of unearned income would have only the amount above $2,700 taxed at the parents’ rate.
Who the kiddie tax covers
The kiddie tax applies based on the child’s age and whether the child provides most of their own support. The age rules pull in older students, not just young children.
- Under 18: Subject to the rule regardless of student status.
- Age 18: Subject if earned income does not exceed half of their support.
- Ages 19 to 23: Subject if a full-time student and earned income does not exceed half of their support.
Once a child earns more than half their own support, the kiddie tax generally no longer applies.
Pro Tip
If you hold appreciated investments in a child’s custodial account, the kiddie tax can erase the benefit of selling in the child’s name. Consider timing sales for a year the child is no longer subject to the rule, or favoring growth assets that defer income until then.
How the kiddie tax is reported
The kiddie tax is calculated on IRS Form 8615 and attached to the child’s tax return. The form determines how much of the unearned income is taxed at the parents’ rate.
In some cases, parents can instead report a child’s interest and dividends on their own return using Form 8814, thereby avoiding the need to file a separate return for the child.
How to handle the kiddie tax
- Total the unearned income: Add interest, dividends, and capital gains in the child’s name.
- Check the threshold: Compare the total to the year’s $2,700 limit for 2026.
- Confirm the age test: Verify the child meets the age and support conditions.
- File Form 8615: Attach it to the child’s return to apply the parents’ rate to the excess.
- Consider Form 8814: If eligible, report the income on the parents’ return instead.
Choosing between Form 8615 and Form 8814 can change the total tax owed, so it is worth comparing both before filing.
Related reading on family taxes
- IRS Form 8814: how parents can report a child’s income on their own return.
- Dividend: a form of unearned income that counts toward the threshold.
- Custodial accounts: the account type that often triggers the kiddie tax.
- Qualified dividends: a form of unearned income that counts toward the threshold.
Frequently asked questions
What is the kiddie tax?
The kiddie tax taxes a child’s unearned income above an annual threshold at the parents’ marginal rate. It prevents families from shifting investment income to children to take advantage of lower rates.
What is the kiddie tax threshold for 2026?
For 2026, the first $1,350 of unearned income is tax-free and the next $1,350 is taxed at the child’s rate. Unearned income above $2,700 is taxed at the parents’ marginal rate.
Does the kiddie tax apply to a child’s job income?
No. The kiddie tax applies only to unearned income such as interest, dividends, and capital gains. Wages and self-employment income are taxed at the child’s own rate.
At what age does the kiddie tax stop?
It generally stops once a child turns 18 and provides more than half their own support, or after age 23 for full-time students. A child who earns more than half their support is usually no longer subject to it.
What form is used for the kiddie tax?
The kiddie tax is figured on Form 8615, attached to the child’s return. Parents may instead use Form 8814 to report a child’s interest and dividends on their own return in some cases.
Key takeaways
- The kiddie tax taxes a child’s unearned income above a threshold at the parents’ rate.
- For 2026, the first $1,350 is tax-free, the next $1,350 is taxed at the child’s rate, and income above $2,700 is taxed at the parents’ rate.
- It applies to unearned income only, not wages or self-employment income.
- It covers most children under 19 and full-time students under 24 who do not pay most of their own support.
- It is reported on Form 8615, with Form 8814 as an alternative in some cases.
The kiddie tax often surfaces alongside custodial accounts and education planning. You can compare tax preparation and filing services to handle Form 8615 and decide between filing options.
Table of Contents