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Kiddie tax is a tax law that applies to kids with unearned income. The purpose of this tax is to keep parents from avoiding taxes by transferring assets or investments to their kids. In other words, Uncle Sam wants all his money. This tax is a bit complex so I’ll share the tip of the iceberg.
To minimize kiddie taxes, you can invest for your kids using tax-advantaged accounts like 529 Plans, or IRAs if they have earned income.
Need more help? Work with a tax professional to ensure your investments for your kids make sense tax-wise.
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Rianka R. Dorsainvil, CFP®️ is the Co-Founder and Co-CEO of 2050 Wealth Partners a virtual, fee-only comprehensive financial planning firm dedicated to serving first-generation wealth-builders, entrepreneurs, and thriving professionals. Rianka also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.
As an award winning successful, millennial Certified Financial Planner professional, Rianka offers a unique perspective not only on the current state of the financial service industry, but on how to stay relevant in an ever-changing world.
Rianka serves as a member of CNBC’s Digital Financial Advisor Council and CFP Board’s Diversity Advisory Group, is a Forbes Personal Finance Contributor, and has been recognized for her accomplishments and leadership within the industry by leading publications and organizations such as Investment News’ inaugural 2017 Women to Watch Rising Star and Wealth Management’s Ten to Watch in 2018. She has been published in PBS NewsHour, Forbes, USA Today, Black Enterprise, CNBC, Women’s Health, and more.