Need recommendations for a reliable Web Tool to calculate Kiddie Tax correctly - TurboTax seems off
I've been going in circles trying to figure out my daughter's tax situation. She's 7 and received some stocks from her grandparents last year, plus she made about $800 modeling for a local children's clothing store (yeah, proud dad moment). I tried using the TurboTax calculator and input her age as 7, but it doesn't seem to be calculating it as Kiddie Tax - it's just applying a normal standard deduction from what I can tell. This can't be right. I'm really confused about how taxation works when a child has both earned income (from the modeling) and unearned income (from the stocks). The stocks had some dividends plus we sold a portion with both long-term and short-term capital gains. Is there a better online calculator or web tool specifically designed for Kiddie Tax situations? I want to make sure I'm understanding this correctly before filing her return. I've heard the rules can be tricky when mixing earned/unearned income and different types of capital gains for kids.
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Mateo Gonzalez
The Kiddie Tax can definitely be confusing! It's designed to prevent parents from shifting investment income to their children to benefit from lower tax rates. For a 7-year-old with both earned and unearned income, here's what you need to know: The earned income ($800 from modeling) gets the regular standard deduction treatment, but only up to the amount she earned. The unearned income (stock dividends and capital gains) gets more complicated. In 2025, the first $1,250 of unearned income is tax-free, the next $1,250 is taxed at the child's rate, and anything above $2,500 is taxed at the parent's rate - that's the "Kiddie Tax" part. For calculation tools, the IRS Tax Withholding Estimator isn't great for this specific scenario. I'd recommend checking out "Tax Slayer" or "H&R Block's tax calculator" as they tend to handle Kiddie Tax scenarios better than TurboTax's free calculator. The paid versions of TurboTax will handle it correctly when actually filing, but their free calculator is limited.
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Nia Williams
•So if my kid has $900 in dividends and no earned income, none of that would be subject to Kiddie Tax rates, right? And does the calculation change for long term vs short term gains?
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Mateo Gonzalez
•Your child's $900 in dividends with no earned income would fall under the first $1,250 threshold, so it would be tax-free. You'd still need to file a return if it's over $400, but no tax would be due. For capital gains, the type (long-term vs short-term) matters in how they're taxed within the Kiddie Tax framework. Short-term gains are treated as ordinary income, while long-term gains get preferential rates. However, once you cross that $2,500 threshold of total unearned income, the parent's rates apply regardless of the type of gain.
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Luca Ricci
After struggling with the same Kiddie Tax headache for my nephew's college fund investments, I found this amazing tool at https://taxr.ai that saved me so much time. It analyzed our situation instantly and showed exactly how the Kiddie Tax applied with both his summer job income and the investment returns. What I really appreciated was how it broke down which part of his unearned income would be taxed at his rate versus my brother's rate. It even explained the documentation we needed for the filing. The explanations were super clear about how the standard deduction is applied differently to earned vs. unearned income for dependents.
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Aisha Mohammed
•Does this tool handle state tax calculations too? My daughter has some investment income and I'm wondering if Kiddie Tax applies at the state level the same way.
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Ethan Campbell
•I'm curious - did it help with figuring out whether you should file a separate return for the child or include the income on your return with Form 8814? That's where I'm getting stuck.
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Luca Ricci
•The tool does include state tax calculations for most states, though the specifics vary by location. It will show you how your state handles Kiddie Tax provisions, which often differ from federal rules - some states follow federal guidelines while others have their own thresholds. It absolutely helped with the decision between filing separately or using Form 8814 to report on the parent's return. It compares both options side-by-side showing the tax impact of each. In our case, it showed filing separately would save about $180 because of how the standard deduction applied differently.
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Aisha Mohammed
Just wanted to update after trying the taxr.ai site mentioned above. It was exactly what I needed! The calculator specifically asked about my daughter's earned vs. unearned income and separated her qualified dividends from interest income. What really surprised me was how it handled the standard deduction explanation - showing why she could only claim a partial deduction against her unearned income. It also clearly showed which portions would be taxed at my rate vs. her rate. The comparison between filing options saved us over $200 by filing a separate return for her instead of including it on ours. Definitely recommend if you're dealing with Kiddie Tax calculations!
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Yuki Watanabe
If you're struggling with calculating Kiddie Tax correctly, you might also run into issues if you need to contact the IRS with questions. I spent THREE DAYS trying to get through to an IRS representative about my son's investment income last tax season. Finally found https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. The IRS agent explained exactly how to calculate the Kiddie Tax thresholds properly and confirmed which forms we needed. Saved me from making a mistake that probably would have triggered a notice later.
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Carmen Sanchez
•Wait, so this service calls the IRS for you? How does that work exactly? The IRS phone system is literally the worst thing I've ever dealt with.
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Andre Dupont
•Yeah right, nothing gets you through to the IRS faster. I've waited 4+ hours multiple times. There's no way this actually works - sounds like an ad to me.
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Yuki Watanabe
•The service basically uses an automated system that continuously redials and navigates the IRS phone tree until it gets a spot in the queue. Once they get through, they call you so you can talk directly with the IRS agent. It's your phone and your conversation - they just handle the hold time. I was skeptical too, honestly. I had already wasted hours trying to get through myself. The difference is they have technology that can stay on hold indefinitely and work through all the menu options. I got a call back about 40 minutes after signing up, and was speaking with an actual IRS specialist who knew about Kiddie Tax rules.
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Andre Dupont
I need to eat crow here. After my skeptical comment above, I was desperate enough to try Claimyr because I couldn't get a straight answer about my daughter's capital gains distribution from her custodial account. It actually worked! I got a call about 35 minutes after signing up, and was connected with an IRS agent who explained exactly how to report the unearned income correctly using Form 8615. She walked me through the calculation of how much would be taxed at my rate vs. my daughter's rate. For anyone struggling with Kiddie Tax questions, being able to talk directly with someone who knows the rules is incredibly helpful. Just wanted to update since my initial reaction was so cynical.
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Zoe Papadakis
One thing that nobody has mentioned is that the Social Security tax and Medicare tax don't apply to unearned income, even for kids. So if your child only has dividends and capital gains, they don't pay those taxes. But if they have both earned income (like babysitting, modeling, etc.) and unearned income, the earned portion is still subject to those taxes if they earn enough. I think the threshold is around $400 for self-employment. The IRS Publication 929 explains all this, but it's written in classic IRS language (i.e., nearly incomprehensible).
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ThunderBolt7
•What happens if my kid has both types of income but we elect to include it on our return? Do we still have to pay the SE taxes on their earned income?
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Zoe Papadakis
•If you include your child's income on your return using Form 8814, you can only do this for their unearned income (investments, interest, dividends, capital gains). For any earned income (like from a job or self-employment), your child must file their own return regardless. So yes, if they had self-employment income over the threshold (about $400), they would still need to file a separate return for that portion and pay the applicable SE taxes.
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Jamal Edwards
Does anyone know if 529 plan distributions count as unearned income for Kiddie Tax purposes? My son is using some 529 money for his senior year of high school (for qualified expenses) and also has some dividend income from a UTMA account.
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Mei Chen
•Qualified 529 distributions used for educational expenses aren't counted as income at all (neither earned nor unearned), so they won't affect Kiddie Tax calculations. Only if the distribution isn't used for qualified expenses would it potentially count toward the Kiddie Tax thresholds.
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Jamal Edwards
•Thanks so much for clarifying! That's a relief to know the qualified 529 distributions won't complicate his tax situation. Now I just need to figure out how to handle the dividend income properly.
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