UTMA [Uniform Transfers to Minors Act]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
indexonlyplease
Posts: 1571
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

UTMA [Uniform Transfers to Minors Act]

Post by indexonlyplease » Mon Dec 24, 2018 4:06 pm

Should I be looking at my son's account to TGH this account. He has another 2 years 21 in Florida then it's his. Does it matter to TGH while under the UTMA? Never though of this.

He is a part time worker in college full time.

User avatar
smarcus3
Posts: 260
Joined: Sun Nov 18, 2018 9:57 pm
Location: USA

Re: UTMA

Post by smarcus3 » Mon Dec 24, 2018 5:53 pm

Doesn't a utma transfer at 18 years old?

Tgh?
This is my personal opinion. I'm an engineer not a financial advisor.

User avatar
RickBoglehead
Posts: 5595
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: UTMA

Post by RickBoglehead » Mon Dec 24, 2018 6:02 pm

Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

livesoft
Posts: 69575
Joined: Thu Mar 01, 2007 8:00 pm

Re: UTMA

Post by livesoft » Mon Dec 24, 2018 6:12 pm

It was important to TGH my son's UTMA last year because if it wasn't done, it would've cost more in taxes this year when he cashed it out.
Wiki This signature message sponsored by sscritic: Learn to fish.

Spirit Rider
Posts: 12203
Joined: Fri Mar 02, 2007 2:39 pm

Re: UTMA

Post by Spirit Rider » Mon Dec 24, 2018 7:35 pm

You should always TGH a UTMA up to the Kiddie Tax limit. With the tax reform, this is now up to $4700.

Since the OP's son has earned income, his unearned income standard deduction is likely only $350.

Any ordinary income (interest, non-qualified dividends, STCG, etc...) > $350 will likely be subject to a 10% tax. LTCG and qualified dividends up to ($4700 - ordinary income) will subject to a 0% capital gains tax rate.

The OP should TGH $4700 - LTCG from redemptions and distributions - all ordinary income including any from distributions.

The OP's son should continue to do the same.

User avatar
LadyGeek
Site Admin
Posts: 58647
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: UTMA [Uniform Transfers to Minors Act]

Post by LadyGeek » Mon Dec 24, 2018 10:21 pm

This thread is now in the Personal Finance (Not Investing) forum (tax issues). I retitled the thread to help with the acronym.

The wiki has some background info: Uniform Gift to Minors Act (also discusses UTMA).

TGH == Tax gain harvesting
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Topic Author
indexonlyplease
Posts: 1571
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

Re: UTMA

Post by indexonlyplease » Sat Dec 29, 2018 11:39 am

Spirit Rider wrote:
Mon Dec 24, 2018 7:35 pm
You should always TGH a UTMA up to the Kiddie Tax limit. With the tax reform, this is now up to $4700.

Since the OP's son has earned income, his unearned income standard deduction is likely only $350.

Any ordinary income (interest, non-qualified dividends, STCG, etc...) > $350 will likely be subject to a 10% tax. LTCG and qualified dividends up to ($4700 - ordinary income) will subject to a 0% capital gains tax rate.

The OP should TGH $4700 - LTCG from redemptions and distributions - all ordinary income including any from distributions.

The OP's son should continue to do the same.
I am looking and reading but I don't see 4700. I see 2200 for 201 on Kittie tax?????

Spirit Rider
Posts: 12203
Joined: Fri Mar 02, 2007 2:39 pm

Re: UTMA

Post by Spirit Rider » Sat Dec 29, 2018 12:19 pm

indexonlyplease wrote:
Sat Dec 29, 2018 11:39 am
Spirit Rider wrote:
Mon Dec 24, 2018 7:35 pm
You should always TGH a UTMA up to the Kiddie Tax limit. With the tax reform, this is now up to $4700.

Since the OP's son has earned income, his unearned income standard deduction is likely only $350.

Any ordinary income (interest, non-qualified dividends, STCG, etc...) > $350 will likely be subject to a 10% tax. LTCG and qualified dividends up to ($4700 - ordinary income) will subject to a 0% capital gains tax rate.

The OP should TGH $4700 - LTCG from redemptions and distributions - all ordinary income including any from distributions.

The OP's son should continue to do the same.
I am looking and reading but I don't see 4700. I see 2200 for 201 on Kittie tax?????
  • The 2018 unearned income standard deduction = ($1050 - the first $700 in earned income) - (the first $350 in earned income > $11,650)
  • The next $2100 - the unearned income standard deduction is taxed at the dependent's tax rates
    • Ordinary income 10% tax rate
    • Capital gains 0% tax rate
  • The amounts > $2100 are taxed at trust tax rates. This first bracket is:
    • Ordinary income up to $2550 10% tax rate
    • Capital gains up to $2600 0% tax rate
Therefore up to $2100 + $2600 = $4700 in capital gains can be be tax free.

As I pointed out above this will depend on any amount of ordinary income. The tax on any ordinary income will depend on the amount and the unearned income standard deduction.

Topic Author
indexonlyplease
Posts: 1571
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

Re: UTMA

Post by indexonlyplease » Sat Dec 29, 2018 12:28 pm

Spirit Rider wrote:
Sat Dec 29, 2018 12:19 pm
indexonlyplease wrote:
Sat Dec 29, 2018 11:39 am
Spirit Rider wrote:
Mon Dec 24, 2018 7:35 pm
You should always TGH a UTMA up to the Kiddie Tax limit. With the tax reform, this is now up to $4700.

Since the OP's son has earned income, his unearned income standard deduction is likely only $350.

Any ordinary income (interest, non-qualified dividends, STCG, etc...) > $350 will likely be subject to a 10% tax. LTCG and qualified dividends up to ($4700 - ordinary income) will subject to a 0% capital gains tax rate.

The OP should TGH $4700 - LTCG from redemptions and distributions - all ordinary income including any from distributions.

The OP's son should continue to do the same.
I am looking and reading but I don't see 4700. I see 2200 for 201 on Kittie tax?????
  • The 2018 unearned income standard deduction = ($1050 - the first $700 in earned income) - (the first $350 in earned income > $11,650)
  • The next $2100 - the unearned income standard deduction is taxed at the dependent's tax rates
    • Ordinary income 10% tax rate
    • Capital gains 0% tax rate
  • The amounts > $2100 are taxed at trust tax rates. This first bracket is:
    • Ordinary income up to $2550 10% tax rate
    • Capital gains up to $2600 0% tax rate
Therefore up to $2100 + $2600 = $4700 in capital gains can be be tax free.

As I pointed out above this will depend on any amount of ordinary income. The tax on any ordinary income will depend on the amount and the unearned income standard deduction.

Got it Thanks

Topic Author
indexonlyplease
Posts: 1571
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

Re: UTMA [Uniform Transfers to Minors Act]

Post by indexonlyplease » Sun Dec 30, 2018 8:47 am

The question I just thought of. What is advantage of the UTMA if you have to worry about kittie taxes, capital gains, dividend act. Would it be better for someone to just put the funds in the childs name and fund it?

Except that the child can't touch it until 21 (Florida)

Grt2bOutdoors
Posts: 21733
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: UTMA [Uniform Transfers to Minors Act]

Post by Grt2bOutdoors » Sun Dec 30, 2018 8:55 am

indexonlyplease wrote:
Sun Dec 30, 2018 8:47 am
The question I just thought of. What is advantage of the UTMA if you have to worry about kittie taxes, capital gains, dividend act. Would it be better for someone to just put the funds in the childs name and fund it?

Except that the child can't touch it until 21 (Florida)
Minors are not legally recognized to transact on accounts. The UTMA is to permit the child to be the owner of the account while a legal custodian performs the transactions.

P.S. The dog will take care of the "kittie". :twisted:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
GreatOdinsRaven
Posts: 550
Joined: Thu Apr 23, 2015 8:47 pm

Re: UTMA [Uniform Transfers to Minors Act]

Post by GreatOdinsRaven » Sun Dec 30, 2018 10:05 am

indexonlyplease wrote:
Sun Dec 30, 2018 8:47 am
The question I just thought of. What is advantage of the UTMA if you have to worry about kittie taxes, capital gains, dividend act. Would it be better for someone to just put the funds in the childs name and fund it?

Except that the child can't touch it until 21 (Florida)
In Florida there is the possibility to extend it from 21 to 25 years of age.
"The greatest enemies of the equity investor are expenses and emotions." -John C. Bogle, Little Book of Common Sense Investing. | | "Winter is coming." Lord Eddard Stark.

Topic Author
indexonlyplease
Posts: 1571
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

Re: UTMA [Uniform Transfers to Minors Act]

Post by indexonlyplease » Sun Dec 30, 2018 11:16 am

GreatOdinsRaven wrote:
Sun Dec 30, 2018 10:05 am
indexonlyplease wrote:
Sun Dec 30, 2018 8:47 am
The question I just thought of. What is advantage of the UTMA if you have to worry about kittie taxes, capital gains, dividend act. Would it be better for someone to just put the funds in the childs name and fund it?

Except that the child can't touch it until 21 (Florida)
In Florida there is the possibility to extend it from 21 to 25 years of age.
Good info, Thanks

Post Reply