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J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return by J.K. Lasser Institute

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24.2 Children Subject to “Kiddie Tax” for 2012

The “kiddie tax” may subject a portion of your child’s investment income to tax at your tax rate, where your child’s tax rate is lower than yours. For 2012 tax returns, the kiddie tax applies if all of the following are true:

  • Your child either (1) was under age 18 at the end of 2012, (2) was age 18 at the end of 2012 and did not have earned income exceeding half of his or her support for the year, or (3) was a full-time student during 2012 who at the end of the year was age 19 through 23 and did not have earned income exceeding half of his or her support for the year.
For children born on January 1, the IRS treats the child’s birthday as being on the last day of the prior year. Thus, a child who attains age 24 on January 1, 2013 is considered to be age 24, not 23, on December 31, 2012, and so the kiddie tax does not apply to the child’s 2012 investment income.
The dependency exemption rules for determining full-time student status (21.3) and support (21.5) apply for determining if the kiddie tax age test applies.
  • Your child had more than $1,900 of investment income. The $1,900 floor is increased, as discussed below, if the child has itemized deductions exceeding $950 that are directly connected to the production of investment income.
  • If married, your child filed separately from his or her spouse.

If both of a child’s parents were deceased at the end of 2012, the kiddie tax computation does not apply, and the child’s tax is ...

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