The kiddie tax is the rule that taxes a child’s unearned income above an indexed threshold at the parent’s tax rate rather than at the child’s own rate. It is not a separate tax, and it does not reach a child’s wages. Section 1(g) sets the child’s regular income tax as the greater of the tax figured without the rule, or the tax on taxable income reduced by net unearned income plus the child’s share of the allocable parental tax (26 U.S.C. 1(g)(1)).
Because the answer is the greater of two computations, the rule can only raise a child’s tax, never lower it, and Form 8615 makes that comparison at its last line (IRS, Form 8615 (2025)). Unearned income is income other than pay for work actually performed, so it takes in interest, dividends, capital gains and capital gain distributions, rents, royalties, and pension and annuity income, while a summer job’s wages stay outside the rule entirely (IRS, Instructions for Form 8615 (2025)).
Who the Rule Reaches
The age and support test has two branches. The child either has not attained age 18 before the close of the taxable year, or has attained 18, meets the age requirements of section 152(c)(3), and has earned income that does not exceed one half of the child’s own support (26 U.S.C. 1(g)(2)(A)). Those age requirements are under 19 at the close of the calendar year, or under 24 for a student (26 U.S.C. 152(c)(3)). So the second branch catches an 18-year-old, student or not, and a full-time student at least 19 and under 24, both on the support test (IRS, Instructions for Form 8615 (2025)).
Three conditions sit alongside it. At least one parent must be alive at the close of the taxable year, and the child must not file a joint return (26 U.S.C. 1(g)(2)). The child must also be required to file a return and, for 2025, have had more than $2,700 of unearned income (IRS, Instructions for Form 8615 (2025)). None of these conditions turns on whether the child is claimed as a dependent.
Net Unearned Income and the Three Tiers
Net unearned income is the figure the rule turns on. It is the part of adjusted gross income not attributable to earned income, reduced by two amounts: the amount in effect under section 63(c)(5)(A), plus the greater of that same amount or the itemized deductions directly connected with producing that income (26 U.S.C. 1(g)(4)(A)). It can never exceed the child’s taxable income for the year (26 U.S.C. 1(g)(4)(B)).
That double subtraction builds three tiers out of one figure. For a taxable year beginning in 2026 the section 63(c)(5)(A) amount is $1,350 (IRS, Rev. Proc. 2025-32), and a child who does not itemize subtracts it twice, for $2,700. The 2025 form works the same way and prints the doubled figure as a single $2,700 entry on line 2 (IRS, Form 8615 (2025)).
The tiers fall straight out of that. For a child another taxpayer can claim, the first $1,350 is absorbed by the child’s own basic standard deduction, which section 63(c)(5) caps at the greater of $1,350 or $450 plus earned income (IRS, Rev. Proc. 2025-32), and that cap is set out in standard deduction. The next $1,350 is taxed at the child’s own rate. Everything above $2,700 is net unearned income, the slice taxed at the parent’s rate where the parent’s rate is higher (IRS, Instructions for Form 8615 (2025)). What a marginal rate does to a return is in tax liability.
That rate reaches the slice by computation, not by moving the income. Allocable parental tax is the increase in the parent’s tax if the parent’s taxable income had included the net unearned income of every child of that parent the rule applies to, and each child takes a share in proportion to its own net unearned income (26 U.S.C. 1(g)(3)). Where the slice is qualified dividends or net capital gain, it is figured on the parent’s Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet, not the tax table (IRS, Instructions for Form 8615 (2025)).
Where the parents are married to each other and file a joint return, Form 8615 uses that joint return (IRS, Instructions for Form 8615 (2025)). Section 1(g)(5) names the parent in the other cases: the custodial parent where the parents are not married, and the parent with the greater taxable income where they are married and filing separately (26 U.S.C. 1(g)(5)).
Say a child under 18 who can be claimed as a dependent has taxable interest and dividends for 2026, no earned income and no itemized deductions. One figure splits three ways.
Unearned income 6,000
Less the section 63(c)(5)(A) amount 1,350 untaxed
Less that same amount again 1,350 taxed at the child's rate
Net unearned income 3,300 taxed at the parent's rateForm 8615 and the Form 8814 Election
Two forms sit on this rule and they run in opposite directions. Form 8615, Tax for Certain Children Who Have Unearned Income, attaches to the child’s own Form 1040 or 1040-NR and figures the child’s tax (IRS, Form 8615 (2025)). Form 8814, Parents’ Election To Report Child’s Interest and Dividends, attaches to the parent’s return, and when the parent elects, the child is treated as having no gross income and files nothing (IRS, Instructions for Form 8814 (2025)).
The election is narrow. The child’s gross income must be only interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends, with no estimated tax payments and no federal income tax withheld in the child’s name, and no joint return (26 U.S.C. 1(g)(7)(A), IRS, Instructions for Form 8814 (2025)). There is also a dollar window: gross income must be more than the section 63(c)(5)(A) amount and less than ten times it, so for 2026, more than $1,350 and less than $13,500 (IRS, Rev. Proc. 2025-32).
Electing has a price. The parent picks up the child’s gross income above twice that amount, plus a tax of 10 percent of the lesser of the amount itself or the excess of the child’s gross income over it (26 U.S.C. 1(g)(7)(B)). On the 2025 form, a parent whose child had qualified dividends or capital gain distributions may pay up to $135 more tax by electing rather than filing a separate return for the child (IRS, Instructions for Form 8814 (2025)).
Where It Lands in a Firm’s Filing Sequence
The child’s return sequences after the parents’. Form 8615 needs the parent’s taxable income, the parent’s filing status and the net unearned income of the parent’s other children, and where any of that is unknown by the original due date of the child’s return, the child requests an extension on Form 4868 (IRS, Instructions for Form 8615 (2025)). An extension of time to file is not an extension of time to pay, so an estimate still has to be paid in.
Siblings are one linked computation. Line 7 of each child’s Form 8615 carries the total from line 5 of every other child’s, so a household with more than one filing cannot be closed one child at a time (IRS, Form 8615 (2025)).
A later change on the parents’ return reaches back. If the parents’ income changes after the child’s return is filed, or another child’s net unearned income changes, the child’s tax must be refigured, and a changed tax means Form 1040-X (IRS, Instructions for Form 8615 (2025)).
Common Questions
The child, on the child’s own return, unless the parent elects otherwise. Form 8615 attaches only to the child’s Form 1040 or 1040-NR, so the tax lands there (IRS, Form 8615 (2025)). A parent carries it only by making the election, which puts the child’s interest and dividends on the parent’s return instead (IRS, Instructions for Form 8814 (2025)).
The structure is unchanged. For a taxable year beginning in 2026 the section 63(c)(5)(A) figure is $1,350, and it also sets the parental election window at more than $1,350 and less than $13,500 of the child’s gross income (IRS, Rev. Proc. 2025-32).
There is no single age. It reaches a child with no support test at all for a year at the end of which the child is under 18. For the year the child is 18 at year end it reaches the child only if earned income is not more than half of the child’s support, and after that only a full-time student, on that same support test, through the last year the student is still under 24 at year end (26 U.S.C. 1(g)(2)(A), 26 U.S.C. 152(c)(3), IRS, Instructions for Form 8615 (2025)). It also drops away for any year the child files a joint return, or no parent is alive at the close of the year (26 U.S.C. 1(g)(2)).
There is no separate rule for custodial accounts. The test looks at the child’s unearned income whatever account holds it, so interest, dividends and capital gain distributions credited to a custodial account count like any other unearned income of the child (IRS, Instructions for Form 8615 (2025)). The answer turns on the child’s age and support facts and the size of the unearned income, not the label on the account.
Firms that run out of preparer hours before they run out of returns can put our offshore tax preparers on real work first, through a trial task.
