This post was contributed by a community member. The views expressed here are the author's own.

Health & Fitness

WILL THE KIDDIE TAX APPLY TO YOU?

As a general rule, income is taxed to the taxpayer who receives it at his or her appropriate tax rate. For example, if you’re in the top 39.6% tax bracket, any extra income you receive is taxable to you at the 39.6% rate. Conversely, if your young child is in the lowest 10% bracket, the child is taxed at the 10% rate on income within the bracket.

Initially, the kiddie tax only affected children under age 14, but the age limit has been boosted several times over the years. Currently, the tax applies to your child who is under age 19, or a full-time student under age 24, if the child may be claimed as a dependent on your tax return. Thus, you still may have to pay the kiddie tax for a high school graduate who is working or a college senior.

To avoid or reduce kiddie tax liability, monitor your child’s investments, trying to stay below or near the $2,000 threshold. When appropriate, have your child invest in tax-free municipal bonds or growth stock that doesn’t produce current income. Other investment alternatives are CDs and Treasuries maturing in the future. Don’t let the kiddie tax govern your investment decisions, but don’t forget to take it into account.

Find out what's happening in Holmdel-Hazletwith free, real-time updates from Patch.

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?