Tax Reform - Revised Kiddie Tax

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Spirit Rider
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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Mon Aug 27, 2018 11:09 pm

Nothing in the TCJA changed the Kiddie Tax unearned income standard deduction (2018 = $1050) or the amount subject to the dependent's tax rate (2018 = $1050).

The amount > $2100 is now just subject to the trust marginal tax brackets instead of the parent's marginal tax brackets. The LTCG/QDIV rate <= $4700 should be 0%.

I have not seen any difference of opinion on these basic issues.

There are draft 2018 Form 8615/Instructions, but no draft 2018 Form 1040 Instructions or Schedule D Instructions. So we don't know all the details yet.

deeppizza
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Re: Tax Reform - Revised Kiddie Tax

Post by deeppizza » Thu Aug 30, 2018 10:11 pm

Thanks for the reply spiritrider.

I have a related question under the kiddie tax rules, one that might be elementary:

Using round numbers, let’s assume that I have $1000 in short term capital gains, $500 in short term capital loses, $5000 in long term capital gains, & $300 in long term capital loses; would my total unearned income subject to taxes be $5200 (1000-500 + 5000-300)? But of that $5200, only $500 be subject to the short term capital gains tax rate of 10%, and the remaining $4700 (which is all LTCG) taxed at 0%?

Spirit Rider
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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Thu Aug 30, 2018 10:30 pm

No, the capital gains that puts the total unearned income past $4700 should be taxed at the capital tax rate (15%) of the next bracket. $5200 - $4700 = $500

This is the same as the way standard tax brackets work. I really think you should wait until the relevant instructions are released in at least draft form.

At this point, we don't know what we don't know.

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Re: Tax Reform - Revised Kiddie Tax

Post by 2beachcombers » Wed Sep 19, 2018 4:08 pm

Spirit Rider wrote:
Thu Aug 30, 2018 10:30 pm
No, the capital gains that puts the total unearned income past $4700 should be taxed at the capital tax rate (15%) of the next bracket. $5200 - $4700 = $500

This is the same as the way standard tax brackets work. I really think you should wait until the relevant instructions are released in at least draft form.

At this point, we don't know what we don't know.
https://www.irs.gov/pub/irs-dft/f8615-- ... 018------- 8615 draft--2100 deduction

and 0 tax on LTCG < 2550-see Draft 2018 Schd D and 2018 trust tax rates

https://www.irs.gov/pub/irs-dft/f1041sd--dft.pdf

1C1PRFI_enUS739US739&oq=2018+tax+rates+&aqs=chrome.3.69i57j0l5.13237j1j7&sourceid=chrome&ie=UTF-8

So 2100 + (2550-1) = 4649 should be the tax free magic # .

Spirit Rider
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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Wed Sep 19, 2018 10:38 pm

2beachcombers wrote:
Wed Sep 19, 2018 4:08 pm
Spirit Rider wrote:
Thu Aug 30, 2018 10:30 pm
No, the capital gains that puts the total unearned income past $4700 should be taxed at the capital tax rate (15%) of the next bracket. $5200 - $4700 = $500

This is the same as the way standard tax brackets work. I really think you should wait until the relevant instructions are released in at least draft form.

At this point, we don't know what we don't know.
https://www.irs.gov/pub/irs-dft/f8615-- ... 018------- 8615 draft--2100 deduction

and 0 tax on LTCG < 2550-see Draft 2018 Schd D and 2018 trust tax rates

https://www.irs.gov/pub/irs-dft/f1041sd--dft.pdf

1C1PRFI_enUS739US739&oq=2018+tax+rates+&aqs=chrome.3.69i57j0l5.13237j1j7&sourceid=chrome&ie=UTF-8

So 2100 + (2550-1) = 4649 should be the tax free magic #.
You should actually know what the trust tax brackets are and actually read the documents you are linking before correcting someone else.

From the 2018 draft SCHEDULE D (Form 1041) that you linked, "28 Enter the smaller of the amount on line 21 or $2,600"

The 1st trust ordinary income bracket (10%) is $0 - 2550, but the 1st trust LTCG/QDIV bracket (0%) is $0 - $2600.

I don't know where you invented this "-1" idea. You always subtract the full amount of the bracket to determine the amount taxed at that brackets rate. $2600 in LTCG/QDIV means $2600 - $2600 = $0 taxed at the 2nd trust bracket's 15% LTCG/QDIV tax rate.

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Re: Tax Reform - Revised Kiddie Tax

Post by 2beachcombers » Thu Sep 20, 2018 7:43 am

Thanks for the correction. :oops: I like your # better :beer
jerry

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Re: Tax Reform - Revised Kiddie Tax

Post by indexfundfan » Thu Sep 20, 2018 8:38 am

Spirit Rider wrote:
Thu Aug 30, 2018 10:30 pm
No, the capital gains that puts the total unearned income past $4700 should be taxed at the capital tax rate (15%) of the next bracket. $5200 - $4700 = $500

This is the same as the way standard tax brackets work. I really think you should wait until the relevant instructions are released in at least draft form.

At this point, we don't know what we don't know.
With the latest post by 2beachcombers, does this mean that the draft form is saying that the 0% tax rate is applicable to $4700 of unearned income? (assuming no earned income). Thanks.
My signature has been deleted.

Spirit Rider
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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Thu Sep 20, 2018 10:15 am

indexfundfan wrote:
Thu Sep 20, 2018 8:38 am
With the latest post by 2beachcombers, does this mean that the draft form is saying that the 0% tax rate is applicable to $4700 of unearned income? (assuming no earned income). Thanks.
It depends on how much is ordinary income and how much is LTCG/QDIV. The 0% rate only applies to the latter.

With no earned income, ordinary income > $1050 <= $2100 is subject to dependent's rate (10%) and > $2100 <= $4650 is subject to the 1st trust rate (10%).

Note: I have to say this again. Caveat, we still do not know if there will be any worksheets that will affect any of this.

wxl31
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Re: Tax Reform - Revised Kiddie Tax

Post by wxl31 » Thu Nov 29, 2018 1:51 am

I purchased H&R Block 2018 and did a mock kiddie tax return with combined dividend/capital gains of $4,700. The calculated tax was zero. Going slightly above $4,700 resulted in a non-zero tax.

If someone out there has already purchased TurboTax or other tax software, would like to hear if you got a similar result.

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Re: Tax Reform - Revised Kiddie Tax

Post by HueyLD » Thu Nov 29, 2018 9:12 am

wxl31 wrote:
Thu Nov 29, 2018 1:51 am
I purchased H&R Block 2018 and did a mock kiddie tax return with combined dividend/capital gains of $4,700. The calculated tax was zero. Going slightly above $4,700 resulted in a non-zero tax.

If someone out there has already purchased TurboTax or other tax software, would like to hear if you got a similar result.
Yes, the HRB software got it right if the entire $4,700 is qualified div. and cap gains.

IRS 2018 form 8615 and instructions are published and you can use them to double check the software.

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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Thu Nov 29, 2018 10:49 am

HueyLD wrote:
Thu Nov 29, 2018 9:12 am
wxl31 wrote:
Thu Nov 29, 2018 1:51 am
I purchased H&R Block 2018 and did a mock kiddie tax return with combined dividend/capital gains of $4,700. The calculated tax was zero. Going slightly above $4,700 resulted in a non-zero tax.

If someone out there has already purchased TurboTax or other tax software, would like to hear if you got a similar result.
Yes, the HRB software got it right if the entire $4,700 is qualified div. and cap gains.

IRS 2018 form 8615 and instructions are published and you can use them to double check the software.
A small clarification. It would still be zero tax if no more than $1050 ($350 if >= $700 in earned income) of the investment income was subject to ordinary income tax rates (interest, non-qualified dividends, STCG, etc...).

HenrySouthernCal
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Re: Tax Reform - Revised Kiddie Tax

Post by HenrySouthernCal » Thu Nov 29, 2018 10:13 pm

Spirit Rider wrote:
Thu Nov 29, 2018 10:49 am
HueyLD wrote:
Thu Nov 29, 2018 9:12 am
wxl31 wrote:
Thu Nov 29, 2018 1:51 am
I purchased H&R Block 2018 and did a mock kiddie tax return with combined dividend/capital gains of $4,700. The calculated tax was zero. Going slightly above $4,700 resulted in a non-zero tax.

If someone out there has already purchased TurboTax or other tax software, would like to hear if you got a similar result.
Yes, the HRB software got it right if the entire $4,700 is qualified div. and cap gains.

IRS 2018 form 8615 and instructions are published and you can use them to double check the software.
A small clarification. It would still be zero tax if no more than $1050 ($350 if >= $700 in earned income) of the investment income was subject to ordinary income tax rates (interest, non-qualified dividends, STCG, etc...).
Really nice to know that. Last week I did first-time setup of UGMA account for my son and transferred/gifted $22K to the account. It was from the joint account of my wife and me in Vanguard we held for many years. This week I just sold $10K of it to ultra short bond fund in custodian account, realized $4.6K LTCG (using FIFO cost basis). Didn't dare to go for full $4700 amount as we might got some distribution next month.

Will verify if it is truly tax free when I do my tax return early next year. Disclosure: my son has no earned income.

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Re: Tax Reform - Revised Kiddie Tax

Post by Bmac » Sun Dec 02, 2018 10:18 am

Ok. So please help me with the math. If my child has 0 earned income, $900 Short Term Capital Loss and $4000 in Qualified Dividends in UTMA, how much LTCG can we take and remain at the 0% tax rate for 2018 under the new rules?

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Re: Tax Reform - Revised Kiddie Tax

Post by grabiner » Sun Dec 02, 2018 10:43 am

Bmac wrote:
Sun Dec 02, 2018 10:18 am
Ok. So please help me with the math. If my child has 0 earned income, $900 Short Term Capital Loss and $4000 in Qualified Dividends in UTMA, how much LTCG can we take and remain at the 0% tax rate for 2018 under the new rules?
The first $1050 of income is not taxed at all, because of the standard deduction.

The next $3650 of income is taxed, but the tax rate is 0% if it is qualified dividends or long-term gains.

Thus, in your example, there is already $3100 in income. You can add $1600 more in long-term gains (or even short-term gains since the $900 short-term loss will offset $900 of that) and not owe any tax.
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Re: Tax Reform - Revised Kiddie Tax

Post by Bmac » Sun Dec 02, 2018 10:47 am

Terrific. Thanks. That’s what I was calculating as well.

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Re: Tax Reform - Revised Kiddie Tax

Post by TIAX » Fri Dec 28, 2018 7:06 pm

If there is an unrealized loss in a child's UTMA account, is there a reason to TLH (assuming no gains in child's account for now and you hope to gift shares and tax gain harvest in future years)?

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Re: Tax Reform - Revised Kiddie Tax

Post by grabiner » Fri Dec 28, 2018 8:13 pm

TIAX wrote:
Fri Dec 28, 2018 7:06 pm
If there is an unrealized loss in a child's UTMA account, is there a reason to TLH (assuming no gains in child's account for now and you hope to gift shares and tax gain harvest in future years)?
Only if the unrealized loss won't offset other untaxed income. If the child has $1000 in dividends or salary, realizing a $1000 loss this year will be wasted, as it will offset the $1000 in income which was not taxed anyway. It would be better to hold the stock, as you will have $1000 less in capital gains when it is eventually sold.
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TIAX
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Re: Tax Reform - Revised Kiddie Tax

Post by TIAX » Fri Dec 28, 2018 11:43 pm

grabiner wrote:
Fri Dec 28, 2018 8:13 pm
TIAX wrote:
Fri Dec 28, 2018 7:06 pm
If there is an unrealized loss in a child's UTMA account, is there a reason to TLH (assuming no gains in child's account for now and you hope to gift shares and tax gain harvest in future years)?
Only if the unrealized loss won't offset other untaxed income. If the child has $1000 in dividends or salary, realizing a $1000 loss this year will be wasted, as it will offset the $1000 in income which was not taxed anyway. It would be better to hold the stock, as you will have $1000 less in capital gains when it is eventually sold.
If the child has no salary (or other untaxed income), what would be benefit of TLHing? Can the parent benefit from the child's realized loss?

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Re: Tax Reform - Revised Kiddie Tax

Post by grabiner » Fri Dec 28, 2018 11:48 pm

TIAX wrote:
Fri Dec 28, 2018 11:43 pm
grabiner wrote:
Fri Dec 28, 2018 8:13 pm
TIAX wrote:
Fri Dec 28, 2018 7:06 pm
If there is an unrealized loss in a child's UTMA account, is there a reason to TLH (assuming no gains in child's account for now and you hope to gift shares and tax gain harvest in future years)?
Only if the unrealized loss won't offset other untaxed income. If the child has $1000 in dividends or salary, realizing a $1000 loss this year will be wasted, as it will offset the $1000 in income which was not taxed anyway. It would be better to hold the stock, as you will have $1000 less in capital gains when it is eventually sold.
If the child has no salary (or other untaxed income), what would be benefit of TLHing? Can the parent benefit from the child's realized loss?
The parent won't benefit, but the loss can be carried over to a future year in which it might offset taxable income.
Wiki David Grabiner

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TIAX
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Re: Tax Reform - Revised Kiddie Tax

Post by TIAX » Mon Dec 31, 2018 6:06 pm

Thanks David! Is there a wash sale if you sell in a child's UTMA (realizing a loss) and buy the same fund in a parent's account within 30 days?

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Re: Tax Reform - Revised Kiddie Tax

Post by grabiner » Mon Dec 31, 2018 8:42 pm

TIAX wrote:
Mon Dec 31, 2018 6:06 pm
Thanks David! Is there a wash sale if you sell in a child's UTMA (realizing a loss) and buy the same fund in a parent's account within 30 days?
I believe the rule here is that transactions made by family members can be a wash if they are coordinated, which would apply here since you are doing both. In contrast, if your adult son sells a fund for a loss, and you happen to have bought the same fund independently, there is no wash. (Washes between spouses are automatic.)
Wiki David Grabiner

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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Sat Jul 13, 2019 6:36 pm

grabiner wrote:
Sun Dec 02, 2018 10:43 am
Bmac wrote:
Sun Dec 02, 2018 10:18 am
Ok. So please help me with the math. If my child has 0 earned income, $900 Short Term Capital Loss and $4000 in Qualified Dividends in UTMA, how much LTCG can we take and remain at the 0% tax rate for 2018 under the new rules?
The first $1050 of income is not taxed at all, because of the standard deduction.

The next $3650 of income is taxed, but the tax rate is 0% if it is qualified dividends or long-term gains.

Thus, in your example, there is already $3100 in income. You can add $1600 more in long-term gains (or even short-term gains since the $900 short-term loss will offset $900 of that) and not owe any tax.
Instead of $3650, shouldn't it be $3700 ($1050+$2650). The $3100 is at LTCG rates, right?
In essence, as I understand it, if you get only QDI, the first $4750 are tax free.

(Using the numbers from https://fairmark.com/general-taxation/r ... -brackets/)

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Re: Tax Reform - Revised Kiddie Tax

Post by grabiner » Sun Jul 14, 2019 12:26 am

international001 wrote:
Sat Jul 13, 2019 6:36 pm
grabiner wrote:
Sun Dec 02, 2018 10:43 am
Bmac wrote:
Sun Dec 02, 2018 10:18 am
Ok. So please help me with the math. If my child has 0 earned income, $900 Short Term Capital Loss and $4000 in Qualified Dividends in UTMA, how much LTCG can we take and remain at the 0% tax rate for 2018 under the new rules?
The first $1050 of income is not taxed at all, because of the standard deduction.

The next $3650 of income is taxed, but the tax rate is 0% if it is qualified dividends or long-term gains.

Thus, in your example, there is already $3100 in income. You can add $1600 more in long-term gains (or even short-term gains since the $900 short-term loss will offset $900 of that) and not owe any tax.
Instead of $3650, shouldn't it be $3700 ($1050+$2650). The $3100 is at LTCG rates, right?
In essence, as I understand it, if you get only QDI, the first $4750 are tax free.

(Using the numbers from https://fairmark.com/general-taxation/r ... -brackets/)
Your numbers are correct. The tax bracket boundary for trusts is $2600, but the 15% tax rate for long-term gains is no longer right at the boundary, and both Fairmark's table and ours say that it is $2650.
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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Sun Jul 14, 2019 9:46 am

For 2019, both the unearned income standard deduction and the amount taxed at the dependent's rate were increased to $1100. The 2019 total possible tax-free limit is $2200 + $2650 = $4850.

international001
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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Sun Jul 14, 2019 2:25 pm

Thanks Grabiner for confirming. A minor difference but important for my understanding
Spirit Rider, where do you get $2650 for QDI for 2019? The Fairmark site mentions 2018. I was not able to google anything for 2019, so I assumed the numbers are not released yet

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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Sun Jul 14, 2019 8:24 pm

The inflation adjustments for 2019 tax brackets were released in IRS revenue procedure 2018-57 on 11/15/2018.

SECTION 3. 2019 ADJUSTED ITEMS
Page 8, .01 Tax Rate Tables. For taxable years beginning in 2019, the tax rate tables under §1 are as follows:

Page 10, TABLE 5 - Section 1(j)(2)(E) – Estates and Trusts (now used for Kiddie Taxes after the dependents brackets).
If Taxable Income Is: The Tax Is:
Not over $2,600 10% of the taxable income

Page 11, .03 Maximum Capital Gains Rate. For taxable years beginning in 2019, the Maximum Zero Rate Amount under § 1(h)(1)(B)(i) is $78,750 in the case of a joint return or surviving spouse, $52,750 in the case of an individual who is a head of household (§ 2(b)), $39,375 in the case of any other individual (other than an estate or trust), and $2,650 in the case of an estate or trust.

international001
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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Tue Jul 16, 2019 3:20 am

Thanks for the info.

I found https://www.irs.gov/pub/irs-drop/rp-18-57.pdf
and it seems the taxes for estates are the same than for 2018 (bottom of https://fairmark.com/general-taxation/r ... -brackets/)

What doesn't really look inflaction adjusted at all (at the very least higher numbers like $12,950 could have been adjusted and rounded up)

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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Tue Jul 16, 2019 5:19 am

international001 wrote:
Tue Jul 16, 2019 3:20 am
Thanks for the info.

I found https://www.irs.gov/pub/irs-drop/rp-18-57.pdf
and it seems the taxes for estates are the same than for 2018 (bottom of https://fairmark.com/general-taxation/r ... -brackets/)

What doesn't really look inflaction adjusted at all (at the very least higher numbers like $12,950 could have been adjusted and rounded up)
Revenue Procedure 2018-57 was issued on 11/15/2018 announcing the inflation adjustments to the tax brackets for 2019.

The Fairmark page you linked is also the page for 2019. However, they just mislabeled the year as 2018 in the Trust & Estates table.

That table shows that the top of 2019's 10% ordinary income tax bracket is $2600 increased from 2018's $2550 and the top of 2019's 0% capital gains tax bracket is $2650 increased from 2018's $2600.

Not shown in the Fairmark table but included in RP 18-57 is the 2019 increase in the Kiddie Tax unearned standard deduction and dependent's 10% ordinary income tax bracket/0% capital gains tax bracket to $1100 from 2018's $1050.

These three $50 increases raised the 2019 combined 0% QDIV/LTCG limit to $4850 from 2018's $4700.

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Re: Tax Reform - Revised Kiddie Tax

Post by RetiredAL » Tue Jul 16, 2019 11:56 am

Spirit Rider -- I would like to thank you for the effort and details you provide to us on the Kiddie Tax.

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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Tue Jul 16, 2019 1:56 pm

Ohh.. so it was a mistake on the website. Now everything makes sense.
Thanks a lot for the privileged info. I trust BH more than any website.

I was looking at the following (referenced in another BH thread); https://blog.concannonmiller.com/4thoug ... strategies. IT has 2018 numbers. Is it incorrect?
Adam (age 17) has $2,000 of earned income from delivering newspapers and $7,000 of unearned ordinary income. His standard deduction is $2,350 ($2,000 of earned income + $350).

Adam's taxable income is $6,650 ($2,000 + $7,000 − $2,350). The entire $6,650 is treated as unearned income because his $2,350 standard deduction offsets all of his earned income plus the first $350 of his unearned income.

The first $2,100 (the amount up to the kiddie tax unearned income threshold) is taxed at 10% under the regular rates for single taxpayers, resulting in $210 of tax.

The remaining $4,550 of taxable income ($6,650 - $2,100) falls under the kiddie tax rules and is, therefore, taxed at the rates for trusts and estates as follows:

The first $2,550 is taxed at 10%, resulting in $255 of tax.

The remaining $2,000 ($4,550 - $2,550) is taxed at 24%, resulting in $480 of tax.

So Adam's tax bill is $945 ($210 + $255 + $480).
I think it should say 'the first $1,050 (the amount up to the kiddie tax unearned income threshold) is taxed at 10%'. If I get it right, you have standard deduction taxed at 0%, the next $1,050 at 10% and then the estates/kiddie tax

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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Tue Jul 16, 2019 8:26 pm

international001 wrote:
Tue Jul 16, 2019 1:56 pm
I think it should say 'the first $1,050 (the amount up to the kiddie tax unearned income threshold) is taxed at 10%'. If I get it right, you have standard deduction taxed at 0%, the next $1,050 at 10% and then the estates/kiddie tax
Actually for 2018, it is effectively $2100 - the unearned income portion of the standard deduction taxed at the dependents rate. This could be $1050 - $2100 depending on how much earned income there is. Unearned income > $2100 is subject to the trust tax brackets regardless of the earned income.

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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Sun Jul 21, 2019 7:17 pm

Spirit Rider wrote:
Tue Jul 16, 2019 8:26 pm
international001 wrote:
Tue Jul 16, 2019 1:56 pm
I think it should say 'the first $1,050 (the amount up to the kiddie tax unearned income threshold) is taxed at 10%'. If I get it right, you have standard deduction taxed at 0%, the next $1,050 at 10% and then the estates/kiddie tax
Actually for 2018, it is effectively $2100 - the unearned income portion of the standard deduction taxed at the dependents rate. This could be $1050 - $2100 depending on how much earned income there is. Unearned income > $2100 is subject to the trust tax brackets regardless of the earned income.
I didn't follow you. I'm reading https://www.bogleheads.org/wiki/Kiddie_ ... in_general

My idea is that after standard deduction ($2350 in this case), you tax the next $1050 at 10% and then you start using estate taxes (next $2650 at 10%, then the rest at 24%)

Am I wrong?

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Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Sun Jul 21, 2019 8:36 pm

international001 wrote:
Sun Jul 21, 2019 7:17 pm
Spirit Rider wrote:
Tue Jul 16, 2019 8:26 pm
international001 wrote:
Tue Jul 16, 2019 1:56 pm
I think it should say 'the first $1,050 (the amount up to the kiddie tax unearned income threshold) is taxed at 10%'. If I get it right, you have standard deduction taxed at 0%, the next $1,050 at 10% and then the estates/kiddie tax
Actually for 2018, it is effectively $2100 - the unearned income portion of the standard deduction taxed at the dependents rate. This could be $1050 - $2100 depending on how much earned income there is. Unearned income > $2100 is subject to the trust tax brackets regardless of the earned income.
I didn't follow you. I'm reading https://www.bogleheads.org/wiki/Kiddie_ ... in_general

My idea is that after standard deduction ($2350 in this case), you tax the next $1050 at 10% and then you start using estate taxes (next $2650 at 10%, then the rest at 24%)

Am I wrong?
See Form 8615 and the instructions. For 2018 the unearned income > $2100 is taxed at trust tax rates. This is true regardless of the earned income amount. The earned income only changes the deduction amount. The best thing is to run a scenario through tax software.

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Re: Tax Reform - Revised Kiddie Tax

Post by international001 » Tue Jul 23, 2019 7:00 pm

Ok.. I confess I didn't go through all the instructions.

But can then somebody clarify it on the wiki?
The child (if a dependent) gets a Standard Deduction of $1,100
This has the effect of:
The first $1,100 of unearned income is untaxed
The next $1,100 is taxed at the child's rate
10% for Interest and non-QDI
This is for no earned income and ordinary income
As it's explained:
first $1100: no taxed because standard deduction
next $1100: taxed at special 10% rate
next : taxed at trust rates (10%, 24%, etc)

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

Re: Tax Reform - Revised Kiddie Tax

Post by Spirit Rider » Tue Jul 23, 2019 9:22 pm

international001 wrote:
Tue Jul 23, 2019 7:00 pm
Ok.. I confess I didn't go through all the instructions.
But can then somebody clarify it on the wiki?
The child (if a dependent) gets a Standard Deduction of $1,100
This has the effect of:
The first $1,100 of unearned income is untaxed
The next $1,100 is taxed at the child's rate
10% for Interest and non-QDI
This is for no earned income and ordinary income
As it's explained:
first $1100: no taxed because standard deduction
next $1100: taxed at special 10% rate
next : taxed at trust rates (10%, 24%, etc)
The Wiki is 100% correct. What you are not understanding is the effect of the reduction of the unearned income standard deduction from having earned income > $700 (2018) or > $750 (2019).

I have tried to explain it to you. The only way your are going to understand this is read Form 8615 and its Instructions plus Form 1040 and its instructions. Then run scenarios thru tax software.

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