Kiddie tax

Kiddie tax is a rule that affects kids who get money from investments, like stocks or bonds, and is used to make sure that they don’t pay less taxes than their parents.

So, let’s say your parents give you some money to invest and you make some money from it. Normally, you would pay taxes on that money just like your parents do. But, if you are under the age of 19, or under the age of 24 and a full-time student, and you make more than $2,200 a year from investments, then the kiddie tax rule kicks in.

Basically, what happens is that the amount of money you make from investments that are subject to the kiddie tax is added to your parents’ income when they file their taxes. This means that your parents will have to pay taxes on that money at their tax rate, rather than at your (probably lower) tax rate.

This might sound a bit confusing, but the idea behind the kiddie tax is to make sure that rich families don’t try to avoid paying taxes by giving their kids a bunch of money to invest. By adding that income to the parents’ income, the IRS can make sure that everyone pays their fair share of taxes.