Kiddie Tax 2026: Rules for a Child's Unearned Income
The 2026 kiddie tax threshold is $2,700. See the three-tier stack, who it applies to, worked dollar examples, and whether to file Form 8615 or Form 8814.
Tax47
Tax Calculator USA
Estimate your refund as you read
Tax47 builds a federal return from your W-2s and 1099s.
Free · No sign-up needed
Quick Answer: The 2026 Kiddie Tax Threshold
The 2026 kiddie tax threshold is $2,700. A child’s unearned income stacks in three layers: the first $1,350 is untaxed, the next $1,350 is taxed at the child’s own (usually 10%) rate, and every dollar above $2,700 is taxed at the parent’s marginal rate. The threshold is unchanged from 2025.
Key Takeaways
- $2,700 is the line. Below it, the kiddie tax never applies. Above it, the excess is taxed as if it were the parent’s income.
- It only touches unearned income. A summer job, a part-time retail shift, or any W-2 wages are earned income and are never subject to the kiddie tax.
- It can follow a 23-year-old. Full-time students aged 19 to 23 are covered if their earned income was not more than half of their support.
- Two forms, one decision. Form 8615 goes with the child’s return. Form 8814 is an election to report the income on yours instead, and the IRS warns it can cost up to $135 more in tax.
- Publication 929 is gone. The IRS discontinued it after the 2021 revision. For 2022 and later, the rules live in the Form 8615 and Form 8814 instructions.
- OBBB did not change the kiddie tax. The One Big Beautiful Bill Act made the current rate structure permanent and created Trump Accounts, but left IRC section 1(g) alone.
Who the Kiddie Tax Applies To
The name is misleading. Congress wrote the rule to stop families from parking investments in a low-bracket child’s name, and it applies to any child with more than $2,700 of unearned income who meets one of three age tests.
The three age tests
| Age at end of 2026 | Applies if |
|---|---|
| Under 18 | Always, once unearned income tops $2,700 |
| 18 | Earned income was not more than half of the child’s support |
| 19 to 23, full-time student | Earned income was not more than half of the child’s support |
| 24 or older | Never |
Two more conditions have to be met for any of these to matter: at least one parent must be alive at the end of the year, and the child must not file a joint return for 2026.
The half-of-support escape hatch
The support test is the part parents miss. If an 18-year-old or a full-time student aged 19 to 23 earns enough to cover more than half of their own support (housing, food, tuition, medical care, transportation), the kiddie tax stops applying to them entirely. Their investment income is then taxed at their own rates.
Support is measured in dollars actually spent, not income received. A student who earns $30,000 but banks most of it while their parents pay $40,000 of tuition and living costs has not passed the test. The mechanics mirror the dependency rules covered in our guide to who you can claim as a dependent in 2026.
Full-time student means five months
”Full-time student” means enrolled full time at a school for some part of at least five calendar months during the year. The months do not have to be consecutive. A senior who graduates in May and starts a job in June was still a full-time student for 2026.
What Counts as Unearned Income (and What Doesn’t)
Only unearned income can trigger the kiddie tax, and that one distinction is where most of the confusion starts.
| Unearned (can trigger the kiddie tax) | Earned (never triggers it) |
|---|---|
| Interest, including savings and CDs | Wages and salary |
| Ordinary and qualified dividends | Tips |
| Capital gains and capital gain distributions | Self-employment income (mowing lawns, babysitting, freelance) |
| Rents and royalties | Taxable scholarship amounts reported on a W-2 |
| Taxable scholarship or fellowship amounts not reported on a W-2 | |
| Unemployment compensation | |
| Taxable Social Security, pension, and annuity income | |
| Distributions from trusts |
A summer job never triggers the kiddie tax
A teenager can earn $16,000 flipping burgers and none of it is touched by the kiddie tax. Wages are earned income. They get taxed at the child’s own bracket, sheltered by the child’s own standard deduction, and Form 8615 never enters the picture.
The kiddie tax only wakes up when a brokerage statement, a 1099-INT, or a 1099-DIV shows up in the child’s name.
Does the child have to file at all?
Filing thresholds for a dependent are different from the ones that apply to you, and they depend on which kind of income the child has.
- Wages only: the child must file once earned income exceeds $16,100 for 2026 (the same as the single standard deduction).
- Investment income only: the child must file once unearned income exceeds $1,350.
- Both: the dependent standard deduction is the greater of $1,350 or earned income plus $450, capped at $16,100.
A child below the threshold may still want to file to recover withheld tax. If this is their first return, our walkthrough on filing taxes for the first time covers the basics, and how much you can earn tax free in 2026 explains the threshold math in more detail.
How the Kiddie Tax Is Actually Calculated
The stack is the whole rule. Take the child’s total unearned income for the year and cut it into three slices.
| Slice of unearned income | 2026 amount | Taxed at |
|---|---|---|
| Tier 1 | First $1,350 | 0% (covered by the dependent standard deduction) |
| Tier 2 | Next $1,350 (up to $2,700) | The child’s own rate, normally 10% |
| Tier 3 | Everything above $2,700 | The parent’s marginal rate |
Strictly, the Form 8615 instructions apply the parent’s rate to tier 3 only when the parent’s rate is higher than the child’s. In practice it almost always is, so plan on the parent’s rate.
Tier 3 is why you need to know your own bracket before you can finish the child’s return. Our 2026 federal tax bracket guide has the full rate tables, or you can run the number through the tax bracket calculator.
Example 1: $900 of interest, no tax
- Unearned income: $900
- Below the $1,350 dependent standard deduction
- Tax: $0. No filing requirement, no Form 8615.
Example 2: $2,000 of dividends
- Unearned income: $2,000
- Tier 1: first $1,350 at 0% = $0
- Tier 2: remaining $650 at the child’s 10% = $65
- Total tax: $65. The child files a return, but no Form 8615 because $2,000 is under $2,700.
Example 3: $5,000 of unearned income, parent in the 24% bracket
- Tier 1: $1,350 at 0% = $0
- Tier 2: $1,350 at the child’s 10% = $135
- Tier 3: $5,000 - $2,700 = $2,300 at the parent’s 24% = $552
- Total tax: $687. Form 8615 is attached to the child’s return.
The same $2,300 would have cost $230 at the child’s own 10% rate. So the kiddie tax added $322 to this return.
Example 4: $12,000 of unearned income, parent in the 32% bracket
- Tier 1: $1,350 at 0% = $0
- Tier 2: $1,350 at the child’s 10% = $135
- Tier 3: $12,000 - $2,700 = $9,300 at the parent’s 32% = $2,976
- Total tax: $3,111.
The effective rate on the full $12,000 is about 25.9%, well under 32%, because the first $2,700 still gets favorable treatment.
Qualified dividends and long-term gains keep their preferential rates
Most pages on this topic imply the whole excess gets hit at ordinary rates. It doesn’t. If the child’s unearned income is made up of qualified dividends or long-term capital gains, those amounts keep the 0%, 15%, or 20% preferential rates inside the stack. Form 8615 routes them through the Qualified Dividends and Capital Gain Tax Worksheet rather than the ordinary rate schedule.
In practice, a child whose parent sits in the 24% ordinary bracket may see long-term gains taxed at 15% rather than 24%. See our breakdown of 2026 capital gains tax rates for the thresholds, or model a sale with the capital gains tax calculator.
One AMT footnote
A child subject to the kiddie tax has a capped Alternative Minimum Tax exemption for 2026: the child’s earned income plus $9,750, rather than the full single-filer exemption. It rarely bites, but it exists. Our 2026 AMT guide covers the regular exemption amounts.
Form 8615 vs. Form 8814: Who Files What
Two forms are in play here, and picking between them is the real decision a parent makes.
| Form 8615 | Form 8814 | |
|---|---|---|
| Filed with | The child’s own return | The parent’s return |
| Required or optional | Required when unearned income tops $2,700 and the conditions are met | An election the parent may make |
| Child’s age | Under 18, or 18, or a full-time student 19 to 23 (with the support test) | Under 19, or under 24 if a full-time student |
| Types of income allowed | Any unearned income | Interest, dividends, and capital gain distributions only |
| Gross income limit | None | Less than $13,500 |
| Withholding or estimated payments | Allowed | Disqualifies the election |
| Child files a return? | Yes | No |
Why the shortcut can cost you
Form 8814 is tempting: one fewer return to file. But the IRS puts a blunt warning right in the Form 8814 instructions: “You may pay up to $135 more tax if you make this election.”
The arithmetic behind that number is simple. Under the election, the slice between $1,350 and $2,700 is taxed at a flat 10% and added to your return. On the child’s own return, that same slice might be taxed at 0% if it is made up of qualified dividends or long-term gains that fall in the 0% capital gains band (taxable income up to $49,450 for a single filer in 2026). Ten percent of $1,350 is $135, which is exactly where the IRS number comes from.
The election also folds the child’s income into your adjusted gross income, which can push you past phase-out thresholds for credits and deductions you were counting on.
Which parent makes the election
Married parents filing jointly can use either spouse’s return. Filing separately, the election belongs to the parent with the higher taxable income. Divorced or separated parents use the custodial parent’s return, and where that parent has remarried and files jointly, the joint return is the one used.
Publication 929 no longer exists
A lot of kiddie tax content still points readers to IRS Publication 929, “Tax Rules for Children and Dependents.” The IRS discontinued it after the 2021 revision and stated it will no longer be revised. For tax year 2022 and later, its content lives in the Form 8615 and Form 8814 instructions. If a page tells you to consult Pub 929 for 2026 figures, it has not been updated in years.
Planning Around the Kiddie Tax in 2026
The kiddie tax only reaches taxable accounts, so where the money sits matters more than what it earns.
| Account | Kiddie tax exposure | Notes |
|---|---|---|
| UTMA / UGMA custodial | Fully exposed | Interest, dividends, and realized gains all count as the child’s unearned income each year |
| 529 plan | None | Earnings grow tax-deferred; qualified withdrawals are tax-free |
| Roth IRA for a minor | None | Requires the child’s own earned income; contributions capped at the lesser of that earned income or the $7,500 IRA limit for 2026 |
| Trump Account (new under OBBB) | None annually | Up to $5,000 per year, plus a one-time $1,000 federal contribution for US-citizen children born 2025 to 2028; tax-deferred |
Levers inside a taxable custodial account
- Favor low-dividend growth positions. A broad-market index fund that throws off 1.3% in dividends generates far less annual unearned income than a high-yield bond fund or dividend-focused ETF on the same balance.
- Harvest gains up to the threshold on purpose. Realizing roughly $2,700 of gains a year, then repurchasing, resets the cost basis at little or no tax cost. Skipping years wastes the allowance.
- Watch the age-24 cliff. If a large gain is coming and the child is 22, waiting until the first year the rule no longer applies can move the whole gain to the child’s own bracket.
- Mind the gift tax exclusion when funding. You can put $19,000 per recipient into a custodial account in 2026 ($38,000 if you split gifts with a spouse) without touching your lifetime exemption. The gift tax calculator handles the math.
For college-directed savings, compare the deferral benefit side by side with the 529 plan tax savings calculator.
What OBBB did and did not do
The One Big Beautiful Bill Act (P.L. 119-21) made the 10% through 37% rate structure permanent and raised the Child Tax Credit to $2,200 per qualifying child. It did not touch IRC section 1(g). The kiddie tax thresholds, the age tests, and the forms are the same in 2026 as they were in 2025. If you are also sorting out credits for the same children, our 2026 Child Tax Credit guide covers eligibility and amounts.
State taxes are a separate question
State conformity to the federal kiddie tax varies. Some states adopt IRC section 1(g) by reference, some have their own rules for a dependent’s investment income, and a handful have no income tax at all. Check your state’s dependent filing instructions before assuming the federal answer carries over.
Start with your own bracket
Everything above tier 2 depends on the parent’s marginal rate, so the child’s return cannot be finished until yours is roughly known. Tax47 builds your 2026 return from real W-2 and 1099 data and shows the marginal rate the kiddie tax will borrow. It estimates the parent’s return; it does not prepare Form 8615 for the child. You can also check the rate table directly in our 2026 bracket guide or get the app.
Sources & References
- IRS Instructions for Form 8615: Tax for certain children who have unearned income: the $2,700 threshold, the age tests, and the definition of unearned income.
- IRS Instructions for Form 8814: Parents’ election to report a child’s interest and dividends, including the $13,500 gross income ceiling and the “$135 more tax” warning.
- IRS Revenue Procedure 2025-32 (PDF): 2026 dependent standard deduction ($1,350, or earned income plus $450) and the child AMT exemption.
- IRS: Publication 929 will no longer be revised: Notice that Pub 929 was discontinued and its content moved to the Form 8615 and 8814 instructions.
- IRS: 2026 inflation adjustments including One Big Beautiful Bill amendments: 2026 brackets and standard deduction amounts.
The Form 8615 and Form 8814 instructions posted on IRS.gov are still the 2025 revisions as of publication. The $1,350, $2,700, and $13,500 amounts carry into 2026 because the underlying dependent standard deduction did not move in Revenue Procedure 2025-32. Confirm against the 2026 revisions when they are released.
This article is for educational purposes only and is not tax, legal, or financial advice. All figures are estimates. Tax rules change periodically, always check current IRS guidance or consult a qualified tax professional.
Tax47
Tax Calculator USA
See your refund before you file
Tax47 checks your return for credits and deductions you may qualify for, then shows the refund or the amount you owe.
Free · No sign-up needed
Frequently Asked Questions
What is the kiddie tax threshold for 2026?
$2,700. A child's first $1,350 of unearned income is untaxed, the next $1,350 is taxed at the child's own rate, and anything above $2,700 is taxed at the parent's marginal rate.
Who does the kiddie tax apply to in 2026?
Children under 18; children who are 18 at year-end and whose earned income was not more than half of their support; and full-time students aged 19 to 23 under the same support test. At least one parent must be alive at year-end and the child must not file a joint return.
Does the kiddie tax apply to my child's summer job?
No. The kiddie tax applies only to unearned income such as interest, dividends, capital gains, rents, and royalties. Wages from a job are earned income and are taxed at the child's own rate no matter how much they earn.
Do I file Form 8615 or Form 8814?
Form 8615 is filed with the child's own return when unearned income exceeds $2,700. Form 8814 is an election that lets you report the child's interest and dividends on your return instead, but only if the child's income is interest, dividends, and capital gain distributions only and gross income is under $13,500. The IRS notes the election can cost up to $135 more in tax.
Does my child have to file a tax return in 2026?
A dependent with only wages must file once earned income exceeds $16,100 for 2026. A dependent with only investment income must file once unearned income exceeds $1,350.
How much unearned income can a child have tax-free in 2026?
$1,350. That is the dependent standard deduction floor, and it shelters the first $1,350 of unearned income completely.
Did the One Big Beautiful Bill change the kiddie tax?
No. OBBB made the 2017 rate structure permanent and created Trump Accounts, but it left the kiddie tax rules in IRC section 1(g) unchanged. The 2026 thresholds are the same as 2025.
How do I avoid or reduce the kiddie tax?
Hold the child's money in accounts the rule doesn't reach, such as a 529 plan, a Roth IRA funded from the child's own earned income, or a Trump Account. Inside a taxable custodial account, favor low-dividend growth positions, realize gains deliberately up to the $2,700 threshold each year, and defer large gains until the child ages out of the rule.