Here’s another tax tidbit from Ron Mueller’s newsletter…

WILL THE “KIDDIE TAX” HIT YOU THIS YEAR?
HOLD ON, DON’T BE SO SURE

The “Kiddie Tax” used to apply only to kids under 14, but as of 2006 it applies to kids under 18! Any minor 18 or under with UNearned income of more than $1,700 will have to pay tax on the income at the PARENTS’ marginal rate (not the child’s).

“Unearned Income” refers to “passive” income such as dividends and gains. This rule does NOT apply to EARNED income as discussed in Chapter 8 of It’s How Much You KEEP, That Counts! Not how much you Make