The kiddie tax is designed to tax certain types of unearned income stated on a child's tax return at the marginal tax rate of the parent. This is done in order to keep parents from shifting income to their children and thereby benefiting from the lower marginal tax rate at which a child's income is typically taxed. The kiddie tax applies under the following circumstances:
- The child is not yet 18 years old at the end of the tax year; or
- The child is not yet 24 years old, has earned income that is less than half of his or her support, and is a full-time student.
Several other provisions of the tax also apply that can limit the applicability of the kiddie tax.