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First $1,350 free, next $1,350 at 10% — then the IRS borrows your bracket.
The kiddie tax exists to stop income-shifting: without it, high-bracket parents would park dividend stocks in their kids' names and pay 10% instead of 37%. The 2026 rules give each child $1,350 of unearned income tax-free and another $1,350 at the child's own rate — then everything above $2,700 is taxed at the PARENTS' marginal rate, ordinary or capital-gains depending on the income type. It applies to all children under 18 and to full-time students up to age 23 whose job income doesn't cover half their support — your college junior's custodial account is not exempt. This calculator prices the three layers exactly, including the ordinary-vs-capital-gains split, and flags when the Form 8814 parent election (gross income under $13,500) can save a separate filing.
Parents with custodial accounts use it at dividend season: over $2,700 of unearned income, the child borrows the parents' bracket — up to 37% — and the tool prices each layer plus the Form 8814 election trade-off.
Yes, potentially until age 24. The rule covers children under 18 unconditionally, plus 18-year-olds and full-time students aged 19–23 whose earned income doesn't exceed half their own support. A 22-year-old senior with a custodial account spinning off $5,000 of dividends and only a small campus job is squarely inside it. The year they turn 24, it ends for good — regardless of student status or support.
It's available when the child's gross income is between $1,350 and $13,500 and entirely interest, dividends, and capital-gain distributions. It saves preparing a separate return for the child. The cost: the income lands on YOUR return, raising your AGI — which can nudge you over the $200k/$250k NIIT threshold, shrink income-sensitive credits, or cost more than the kiddie tax itself would have. Run it both ways if you're anywhere near a phaseout.
Three clean ways. (1) Keep custodial-account income under $2,700 — tilt the account toward growth stocks that don't pay dividends, or muni bonds whose interest is tax-exempt anyway. (2) Favor 529 plans: gains compound and come out tax-free for education, and UTMA-to-529 transfers move existing custodial money into the shelter (the 529 stays the child's property, just spent on education). (3) Earned income is never kiddie-taxed — a teen with a real job can fund a Roth IRA up to their earnings, and decades of tax-free compounding beat anything a custodial brokerage can do.