Major Changes Come to Kiddie Tax
The SECURE Act's fix to the TCJA glitch — that's how Forbes describes what's been going on with the football that is called the Kiddie Tax. When the Tax Cuts and Jobs Act changed the way the Kiddie Tax was figured, it caused a lot of concern for families with children with unearned income. The fix is retroactive for 2019 and 2018 returns.
What's New With the Kiddie Tax?
The kiddie tax — around since 1986 — came about as an effort to close a tax loophole for the wealthy. The idea was that taxing children's passive income at the same rate as their parents would eliminate a sneaky reallocation of money just to avoid taxes.
The kiddie tax is a set of laws designed to stop parents from moving assets to their children to avoid paying taxes. It applies to unearned income — that is, income that doesn't come from working and being employed.
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