Concise Takeaway
When a child has more than $2,700 of unearned income in 2025, part of that income may be taxed at the parents’ tax rates. Parents may elect to report the child’s income on their own return, or the child may file using Form 8615.
Purpose of the Kiddie Tax
The Kiddie Tax prevents shifting investment income to children to reduce tax. It applies to unearned income, such as:
- Interest
- Dividends
- Capital gain distributions
- Rents
- Royalties
- Taxable scholarships not on Form W‑2
- Pension income
- Unemployment compensation
- Trust income
Only net unearned income over $2,700 (2025) is taxed at the parents’ rates.
Parental Election (Form 8814)
Parents may elect to report a child’s interest, dividends, and capital gain distributions on the parents’ return using Form 8814.
Child must meet all conditions
- Under age 19, or under 24 if a full‑time student
- Only income is interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends)
- Gross income < $13,500 (2025)
- Required to file a return unless the parent elects
- No joint return
- No estimated tax payments or prior‑year credits
- No federal income tax withheld
Parent must meet one condition
- Filing jointly with the child’s other parent
- Filing separately but has the higher taxable income
- Unmarried or separated; child lived with this parent most of the year
- If remarried, the custodial parent may elect on a joint return with the new spouse
A separate Form 8814 is required for each child.
When No Parental Election Is Made
If the parents do not or cannot elect:
- The child files their own return
- Form 8615 is used
- All net unearned income over $2,700 is taxed at the parents’ rates if higher
Form 8615 applies when the child:
- Has more than $2,700 unearned income (2025)
- Must file a return (gross income > $1,350)
- Meets one of the age/support tests:
- Under age 18, or
- Age 18 with unearned income not more than half of support, or
- Full‑time student age 19–23 with earned income not more than half of support
- Has at least one living parent
- Does not file a joint return
These rules apply to biological children, adopted children, and stepchildren.
Kiddie Tax Flow Summary
- Determine child’s unearned income
- Check if income exceeds $2,700
- Determine if Form 8814 election is allowed
- If no election, file Form 8615
- Tax unearned income over $2,700 at parents’ rates