Ugh…Kiddie Tax! Any ideas to avoid this?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not aware of any way around this, at least not at this point in the following year.

What's wrong with him paying his capital gains tax? Regardless, soon he won't be a dependent so this likely won't happen again.

This. I mean, sorry you can't figure out how to shelter your 17 year-old's windfall from taxes but oh well? He's still up 19k for doing literally nothing, I think it will work out in the end.

Because he'd likely pay nothing if he weren't a dependent.

I really wanted to hire this wonderful summer nanny who was highly recommended and my kids adore her. She wanted to be paid under the table because her dad makes 400k+. I understood the issue because it would be throwing her into a much higher tax bracket than she deserves to be in and leaving her with a large tax bill. I couldn't hire her though.

The kiddie tax rule applies to unearned income not earned income. Your nanny apparently wanted to dodge paying taxes, her dad had nothing to do with it.

My teenagers file their own taxes and are still dependents on my return. One gets withholding refunded. The other earns enough to pay.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm not aware of any way around this, at least not at this point in the following year.

What's wrong with him paying his capital gains tax? Regardless, soon he won't be a dependent so this likely won't happen again.

This. I mean, sorry you can't figure out how to shelter your 17 year-old's windfall from taxes but oh well? He's still up 19k for doing literally nothing, I think it will work out in the end.

He did do something. He spent his own time researching the investment and risked his capital. He should reap the rewards and if it wasn’t for the kiddie tax he would owe nothing in LTCG taxes. Just remember without the robust capital markets that the US has to fund investments, entrepreneurial efforts, etc this country would not be the economic powerhouse that it is. There would be substantially less taxpaying jobs to pay for SS, Medicare, and infrastructure as example. You must be a socialist.

[Anonymous]

One thing is clear reading this thread. Most of the posters don’t have a clue about capital gain taxes and most likely don’t prepare their own taxes. Wow…there is a lot of wrong info in some these posts.

[Anonymous]

Anonymous wrote:Why not file a separate return for him? He can still be your dependent..

He is filing a separate return and is still declared as a dependent on the parents return. The kiddie tax still applies. See instructions for IRS Form 8615.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not aware of any way around this, at least not at this point in the following year.

What's wrong with him paying his capital gains tax? Regardless, soon he won't be a dependent so this likely won't happen again.

This. I mean, sorry you can't figure out how to shelter your 17 year-old's windfall from taxes but oh well? He's still up 19k for doing literally nothing, I think it will work out in the end.

He did do something. He spent his own time researching the investment and risked his capital. He should reap the rewards and if it wasn’t for the kiddie tax he would owe nothing in LTCG taxes. Just remember without the robust capital markets that the US has to fund investments, entrepreneurial efforts, etc this country would not be the economic powerhouse that it is. There would be substantially less taxpaying jobs to pay for SS, Medicare, and infrastructure as example. You must be a socialist.

You're right. Without the hard work and entrepreneurialism of 17 year olds like this, I wouldn't be employed. Really, shouldn't we be paying HIM taxes?

[Anonymous]

He can do his homework again and buy his next stock inside of a Roth. He should try to get enough earned income to get the max $7k and trade from there on.
I have only one stock inside my two Roths and my kid's Roth. It went up over 21% just today.
Don't get stuck on what happened. You are missing out growth today and tomorrow. S and P 500 has a new target out for this year. Government printed more money and I think it should run out before the year ends.
There's a nice small match offered for Roth by some companies.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not aware of any way around this, at least not at this point in the following year.

What's wrong with him paying his capital gains tax? Regardless, soon he won't be a dependent so this likely won't happen again.

This. I mean, sorry you can't figure out how to shelter your 17 year-old's windfall from taxes but oh well? He's still up 19k for doing literally nothing, I think it will work out in the end.

He did do something. He spent his own time researching the investment and risked his capital. He should reap the rewards and if it wasn’t for the kiddie tax he would owe nothing in LTCG taxes. Just remember without the robust capital markets that the US has to fund investments, entrepreneurial efforts, etc this country would not be the economic powerhouse that it is. There would be substantially less taxpaying jobs to pay for SS, Medicare, and infrastructure as example. You must be a socialist.

He will reap the rewards. He earned 25k and after paying the cg tax will have 19k. Congrats! Saying "but he wouldn't owe anything if he wasn't a dependent" is like saying I wouldn't owe any US taxes if I was French and earned my money in France. True, but irrelevant!

Just pay the tax. Thinking people should pay the taxes they legally owe dies not make one a socialist. These are the actual current US tax laws.

[Anonymous]

The 0% LTCG bracket for single filers is $44625 or less of taxable income because that's not a lot of money if you're supporting yourself. But your son is not supporting himself. And your talk about wanting to hire a nanny (assuming that's still you, OP) makes me think you were seeing this as a tax dodge for yourself. (If that's really the son's money, I'm pretty sure he wouldn't be spending it on a nanny.)

So, no, there's no tax dodge here. Just pay the taxes and be glad for the $19k windfall.

[Anonymous]

This is a good civics lesson for your kid.

[Anonymous]

A very good lesson for him about taxes..but you can see why the kiddie tax law exists. The wealthy would invest as much as possible through their kids.

[Anonymous]

Anonymous wrote:The 0% LTCG bracket for single filers is $44625 or less of taxable income because that's not a lot of money if you're supporting yourself. But your son is not supporting himself. And your talk about wanting to hire a nanny (assuming that's still you, OP) makes me think you were seeing this as a tax dodge for yourself. (If that's really the son's money, I'm pretty sure he wouldn't be spending it on a nanny.)

So, no, there's no tax dodge here. Just pay the taxes and be glad for the $19k windfall.

This exactly.

[Anonymous]

Anonymous wrote:A very good lesson for him about taxes..but you can see why the kiddie tax law exists. The wealthy would invest as much as possible through their kids.

💯

[Anonymous]

Start a business with many losses

[Anonymous]

Great way to make a libertarian

[Anonymous]

Anonymous wrote:This is a good civics lesson for your kid.

Yes. Take him to Mogadishu so he can see what life is like where no one pays taxes.