Friday, February 9, 2007

New IRS Rules on "Kiddie Tax" Could Affect Many

As you are working on your taxes for 2006, make sure you are aware of some changes to the tax code regarding the so-called "kiddie tax." This applies to certain investors large and small-- not just those who are building wealth with real estate.

Congress took something away from family pocketbooks last year, raising the age at which teens are subject to the "kiddie" tax. This is the tax on the child’s investment income that must be figured at the parent’s top rate instead of the child’s generally lower rate. Before, only those younger than 14 were subject to the higher tax; now, those under 18 are included. That change may ensnare earnings on certain college funds or savings vehicles started before taxpayer-friendly 529 college plans became widely available. Recommendation? Check with your accountant!

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