Short Answer
The kiddie tax (IRC §1(g)) taxes a child's net unearned income above $2,700 at the parent's marginal tax rate instead of the child's own lower rate. For 2025 and 2026 the first $1,350 of a child's unearned income is covered by the dependent standard deduction, the next $1,350 is taxed at the child's rate, and everything above $2,700 is taxed at the parent's rate if it is higher. It applies to children under 18, to 18-year-olds whose earned income is not more than half of their support, and to full-time students age 19 through 23 with the same earned-income test. You report it on Form 8615 attached to the child's return. Wages and other earned income are never subject to the kiddie tax; only investment income is.
How This Is Calculated
This calculator follows IRS Form 8615, which figures the tax on a child's unearned income in three stages: it isolates the net unearned income above $2,700, taxes that slice at the parent's marginal rate, and taxes the rest of the child's income at the child's own rate. For the full background, see our Kiddie Tax Guide.
Step 1: Find the Child's Taxable Income (Line 4) Confirmed
Add the child's unearned and earned income to get adjusted gross income, then subtract the dependent standard deduction (the greater of $1,350 or earned income plus $450, capped at the single standard deduction of $15,750 for 2025 or $16,100 for 2026). The result is the child's taxable income on line 4.
Step 2: Isolate Net Unearned Income Above $2,700 (Lines 1-5) Confirmed
Line 1 is the child's unearned income. Line 2 is $2,700 (twice the $1,350 floor). Line 3 is line 1 minus line 2. Line 5 is the smaller of line 3 or the child's taxable income; this is the net unearned income that will be taxed at the parent's rate. If it is zero or less, there is no kiddie tax.
Step 3: Tentative Tax at the Parent's Rate (Lines 6-13) Confirmed
The tool computes the tax on the parent's taxable income with the child's net unearned income added, minus the tax on the parent's taxable income alone. That difference is the extra tax the family pays because the child's investment income sits in the parent's top bracket. With a single child, the whole amount is the child's share (line 13).
Step 4: Child's Tax Is the Greater of Two Computations (Lines 14-18) Confirmed
The child's remaining taxable income (line 4 minus line 5) is taxed at the child's own rate (line 15). Add the parent-rate tax (line 13) to get line 16. The child's tax (line 18) is the larger of line 16 or the tax on all the child's taxable income at the child's own rate (line 17). When the parent is in a higher bracket, line 16 wins, and the difference is the cost of the kiddie tax.
Why the parent's rate matters so much: a child with $10,000 of unearned income has about $7,300 above the $2,700 threshold. At the child's own 10% rate that slice would cost about $730; taxed at a parent's 24% rate it costs about $1,750, roughly $1,000 more. The kiddie tax does not create a separate levy; it re-prices the slice above $2,700 at the parent's marginal rate. Confirmed
Assumptions
- The child files as single (dependents cannot file jointly) and does not itemize deductions.
- All income is taxed at ordinary rates. Qualified dividends and net long-term capital gains use separate Form 8615 worksheets and may be taxed at 0/15/20% rates not modeled here.
- The child is the only child of the parent who owes the kiddie tax (no sibling net-unearned-income pooling on line 7).
- The parent's taxable income is entered directly; no recomputation of the parent's deductions or credits is done (per the Form 8615 rule).
- The 3.8% Net Investment Income Tax, the alternative minimum tax, and Form 2555 foreign-income adjustments are out of scope.
Frequently Asked Questions
What is the kiddie tax?
The kiddie tax, under IRC section 1(g), taxes a child's net unearned (investment) income above an annual threshold at the parent's marginal tax rate instead of the child's lower rate. For 2025 and 2026 the threshold is $2,700: the first $1,350 of unearned income is offset by the dependent standard deduction, the next $1,350 is taxed at the child's own rate, and everything above $2,700 is taxed at the parent's rate if that rate is higher. It is figured on Form 8615 and attached to the child's return. Congress created it to stop families from shifting investment assets to children to be taxed in a low bracket.
Who is subject to the kiddie tax?
The kiddie tax applies to a child who has more than $2,700 of unearned income, is required to file a return, has at least one living parent, does not file a joint return, and meets one of three age tests at the end of the year: under age 18; age 18 with earned income that is not more than half of the child's support; or a full-time student age 19 through 23 with earned income that is not more than half of the child's support. If the child is 18 or older and earned income exceeds half of their support, the kiddie tax does not apply and the child is taxed at their own rate.
What counts as unearned income for the kiddie tax?
Unearned income is generally all taxable income other than wages, salary, and pay for work the child actually performed. It includes taxable interest, ordinary and qualified dividends, capital gains and capital gain distributions, rents, royalties, taxable scholarship income not reported on a W-2, unemployment compensation, and the taxable part of pension, annuity, and trust distributions. It does not include the child's wages or self-employment earnings (those are earned income), and it does not include tax-exempt interest or other nontaxable amounts.
How is the kiddie tax calculated?
On Form 8615, the child's net unearned income above $2,700 (line 5) is taxed at the parent's marginal rate. The tentative tax at the parent's rate is the extra tax the parent would owe if that net unearned income were added to the parent's taxable income. The child's remaining taxable income is taxed at the child's own rate. The child's tax is the greater of (a) the parent-rate tax on the net unearned income plus the child-rate tax on the rest, or (b) the tax on all the child's taxable income at the child's own rate. The first amount is almost always larger when the parent is in a higher bracket.
What is the difference between Form 8615 and Form 8814?
Form 8615 is filed with the child's own return and computes the kiddie tax. Form 8814 is the parents' election to report the child's interest, ordinary dividends, and capital gain distributions on the parents' return so the child does not have to file at all. Form 8814 is available only if the child's gross income is only from interest and dividends, is more than $1,350 and less than $13,500, and had no estimated payments or backup withholding. The election adds a flat $135 plus the child's income over $2,700 to the parents' return, and it can sometimes raise the family's total tax, so compare both before electing.
Does the kiddie tax apply to a child's wages from a job?
No. A child's wages, salary, and self-employment earnings are earned income, never unearned income, so they are taxed at the child's own rate regardless of the kiddie tax. The kiddie tax only reaches unearned income such as interest, dividends, and capital gains. Earned income does matter in two ways: it raises the child's standard deduction (the dependent standard deduction is the greater of $1,350 or earned income plus $450), and for a child age 18 or older it can fail the age test if earned income exceeds half of the child's support, which takes the child out of the kiddie tax entirely.
Which parent's tax rate is used for the kiddie tax?
If the parents are married and file jointly, the joint return is used. If they file separately, the return of the parent with the greater taxable income is used. If the parents are unmarried, divorced, or separated, the custodial parent's return is used; if the custodial parent has remarried, the stepparent's information on a joint return is used. When more than one child of the same parent owes the kiddie tax, their net unearned income is combined to figure one tentative tax at the parent's rate, then allocated back to each child in proportion to their share.
Is the kiddie tax threshold different for 2025 and 2026?
No. The unearned-income threshold is $2,700 for both 2025 and 2026, built from the $1,350 dependent standard deduction floor that applies in both years (the threshold is twice that floor). The figure comes from Rev. Proc. 2024-40 for 2025 and Rev. Proc. 2025-32 for 2026. What does change between the two years is the parent's tax brackets and the cap on the child's standard deduction (the single standard deduction is $15,750 for 2025 and $16,100 for 2026), so the same inputs can produce slightly different tax in each year.
What To Do Next
If the Child's Unearned Income Is Under $2,700
There is no kiddie tax at the parent's rate, though the child may still need to file if unearned income tops $1,350. Confirm the filing requirement with the Do I Need to File Taxes Calculator.
If the Income Is Only Interest and Dividends Under $13,500
Compare filing Form 8615 on the child's return against the Form 8814 election on the parents' return. The election avoids a separate filing but can cost more. The Kiddie Tax Guide walks through both.
For the Full Background
Read the Kiddie Tax Guide for the age tests, the two-tier floor, the parent-rate computation, the Form 8814 election, and planning moves to reduce the tax.