Kids, Stocks and Taxes-Kiplinger

Ask Kim


Kids, Stocks and Taxes

Kimberly Lankford

Your children's investment income may be subject to kiddie-tax rules.



I want to buy 50 shares of stock for each of my two children through Sharebuilder.com. What are the tax implications of minor children owning stock in a custodial account?

Children younger than 19 or full-time students younger than 24 (assuming they do not provide more than half of their own support) may be subject to kiddie-tax rules. The first $950 of each child’s investment income in both 2010 and 2011 is tax-free, and the next $950 is taxed at the child’s own rate. Any investment income above $1,900 is taxed at the parents’ higher rate. However, the higher rate applies only to a child’s investment income, not to wages or self-employment income.

For some ideas of stocks that are likely to get kids interested in investing, see 5 Stocks Kids Would Love for the Holidays.

Got a question? Ask Kim at askkim@kiplinger.com.



Editor's Picks From Kiplinger


You can get valuable updates like Ask Kim from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger