Talk:Kiddie tax

From Bogleheads
Jump to: navigation, search

Reader feedback: "The standard deduction is e...

209.169.71.189 posted this comment on 15 December 2017 (view all feedback).

"The standard deduction is earned income +$350, ..." is not correct because IRS says

The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of:

  • $1,050, or
  • The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,300).

Example: Child earns $600. The wiki implies standard deduction is $600 + $350 = $950, but IRS says $1050 is the standard deduction.

This is a direct quote from IRS Publication 929, Tax Rules for Children and Dependents (Standard deduction).

Can an expert please review this proposed change? I don't know if this is correct.

Fixed. Grabiner 21:49, 17 December 2017 (EST)

Taxation of children with Earned Income

If the children have earned income then:

  • The standard deduction is the greater of ($1,050) or (earned income + $350), but no more than the normal standard deduction of $6,300 for a single person[1]
  • This has the effect of the first $1,050 of unearned income is untaxed
  • The next $1,050 is taxed at the child's rate
  • Can still realize $2,100 of untaxed unearned income, but only $350 of that can be interest and non-QDI (vs $1050 for no job case)
  • Note that by gifting appreciated securities to a child, one can save at least $315 per year per child in capital gains tax (if in the 15% LTCG bracket) and up to $832 per year per child (if in the 39.6% bracket with tax loss carryforwards)

References

LadyGeek 16:49, 15 December 2017 (EST)