2023 Kiddie Tax Threshold
The 2023 Kiddie Tax Threshold is $1,250.
Effective 2023-01-01Source: Rev. Proc. 2022-38 (IRS)Verified 2026-09-01
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Unearned income threshold | $1,150 | $1,250 | +$100 (+8.7%) |
Who it applies to
Children subject to the kiddie tax under IRC § 1(g) for taxable years beginning in 2023
What changed this year, and why
The unearned income threshold used to reduce net unearned income subject to the kiddie tax was adjusted for inflation to $1,250, up from $1,150 for 2022.
Common questions
- What does the $1,250 threshold do?
- The unearned income threshold of $1,250 reduces net unearned income on a child's return that is subject to the kiddie tax. It is the same $1,250 amount used to determine whether a parent may elect to include a child's gross income in the parent's return.
The five conditions, and the three age tests
For 2023, Form 8615 must be filed for a child who satisfies all five conditions listed by the IRS. First, the child had more than $2,500 of unearned income. Second, the child is required to file a tax return. Third, the child must meet one of three age tests: either the child was under age 18 at the end of 2023; or the child was age 18 at the end of 2023 and did not have earned income that exceeded half of the child's support; or the child was a full-time student at least age 19 and under age 24 at the end of 2023 and did not have earned income that exceeded half of the child's support. Fourth, at least one of the child's parents was alive at the end of 2023. Fifth, the child does not file a joint return for 2023. The term "child" includes a legally adopted child and a stepchild, and the rules apply whether or not the child is a dependent. If neither parent was living at the end of the year, the kiddie tax rules do not apply.
Form 8615 must be filed for any child who meets all of the following conditions. 1. The child had more than $2,500 of unearned income. 2. The child is required to file a tax return. 3. The child either: a. Was under age 18 at the end of 2023, b. Was age 18 at the end of 2023 and didn’t have earned income that was more than half of the child's support, or c. Was a full-time student at least age 19 and under age 24 at the end of 2023 and didn’t have earned income that was more than half of the child's support. (Earned income is defined later. Support is defined below.) 4. At least one of the child's parents was alive at the end of 2023. 5. The child doesn’t file a joint return for 2023.
2023 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (IRS)
What counts as unearned income
Under the federal Kiddie Tax rules for 2023, unearned income means income that does not come from working. The IRS defines it as all income other than salaries, wages, and other pay received for work actually performed — those are earned income. The most common kinds of unearned income are taxable interest, ordinary dividends, and capital gains (including capital gain distributions). But the definition reaches further: it also covers rents and royalties, pension and annuity income, unemployment compensation, and alimony. Taxable scholarship and fellowship grants that are not reported on a Form W-2 are treated as unearned income as well, along with the taxable part of social security and pension payments. A child who is the beneficiary of a trust must also count any income from the trust (other than earned income) toward unearned income. Once a child's unearned income crosses the $1,250 threshold, it may become subject to the Kiddie Tax if the other conditions for filing Form 8615 are met. Earned income — pay for work — is set aside and does not count toward this measure.
Unearned Income Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed (earned income). It includes taxable interest, dividends, capital gains (including capital gain distributions), rents, royalties, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, the taxable part of social security and pension payments, and income (other than earned income) received as the beneficiary of a trust.
2023 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (IRS)
The support test that decides whether an older child is caught
For older children caught by the Kiddie Tax, the IRS requires that earned income not exceed half of the child's support. If earned income is more than half of support, the child does not meet the age-based conditions for filing Form 8615. Support means all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. When adding up the child's total support, count amounts provided by the parent, by the child, and by anyone else. One important exception: a scholarship received by a child who is a full-time student is not counted as support. This support test works together with the $1,250 unearned income threshold to determine whether an older child must file the federal Kiddie Tax form for 2023. The rule ensures that self-supporting young adults are not treated the same as dependent children who receive most of their living expenses from parents or other sources.
Support. Your support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your child’s support, count support provided by you, your child, and others. However, a scholarship received by your child isn’t considered support if your child is a full-time student.
2023 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (IRS)
Reporting the child's income on the parent's return instead
For 2023, instead of filing Form 8615 for a child subject to the kiddie tax, a parent may be able to elect to report the child's interest, ordinary dividends, and capital gain distributions directly on the parent's own return. If the parent makes this election, the child will not have to file a separate tax return or Form 8615. However, the IRS warns that the federal income tax on the child's income, including qualified dividends and capital gain distributions, may be higher if this election is made. Details of the election and how to make it are found on Form 8814, Parents' Election To Report Child's Interest and Dividends. This option can simplify filing by eliminating the child's separate return, but families should compare the tax cost before choosing it, because applying the parent's marginal rate to the child's investment income can produce a larger total tax than if the child filed independently.
The parent may be able to elect to report the child’s interest, ordinary dividends, and capital gain distributions on the parent’s return. If the parent makes this election, the child won’t have to file a return or Form 8615. However, the federal income tax on the child’s income, including qualified dividends and capital gain distributions, may be higher if this election is made.
2023 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (IRS)
Why the child's own bracket is not the end of it
The purpose of Form 8615 is to compute the additional tax that applies when the parent's tax rate is higher than the child's own rate. For 2023, for children under age 18 and certain older children described in the Who Must File section, unearned income over $2,500 is taxed at the parent's rate if the parent's rate is higher than the child's. If the child's unearned income is more than $2,500, Form 8615 is used to figure the child's tax. This means that even if the child is in a low tax bracket on his or her own return, the excess unearned income above the threshold may be taxed at whatever rate applies to the parent's taxable income, which can be substantially higher. The unearned income threshold for 2023 is $1,250, and the $2,500 amount is the point at which the parent's rate begins to apply to the child's investment income. The form ensures that families cannot shift investment income to a child's lower bracket to reduce the overall tax.
For children under age 18 and certain older children described below in Who Must File, unearned income over $2,500 is taxed at the parent's rate if the parent's rate is higher than the child's. If the child's unearned income is more than $2,500, use Form 8615 to figure the child's tax.
2023 Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2022-38 (IRS)
- Unearned income threshold
the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,250.