Does a Child’s Job Avoid Kiddie Tax? — 2025 Earned Income Rules Every Parent Should Know (Updated: Jan 2026)
“My child has a part-time job — does that mean we can avoid the Kiddie Tax?”
For the 2025 tax year (filed in 2026), the answer is: it depends.
Kiddie Tax applies only to unearned income, but whether it actually applies often hinges on student/dependency rules and the self-support test (did the child pay more than half of their own support?).
Below is a parent-friendly breakdown of the 2025 thresholds ($2,700 total tier) and how earned income changes the story.
1️⃣ What Counts as Earned Income?
For Kiddie Tax planning, the IRS generally treats earned income as pay your child receives for work or services.
- ✔ W-2 wages from part-time, weekend, or summer jobs
- ✔ Freelance or gig income reported on Form 1099-NEC
- ✔ Self-employment income
- ✔ Reported tips
Interest, dividends, capital gains (stocks/ETFs), crypto gains, and UTMA/UGMA investment income are unearned income and may be subject to Kiddie Tax.
2️⃣ Why Having a Job Does NOT Automatically Avoid Kiddie Tax
A common myth is: “If my child works, Kiddie Tax goes away.”
In reality, Kiddie Tax is triggered by unearned income and the child’s status (age/student/dependency).
Earned income can help, but it does not magically erase the rule.
The question is not “Did your child work?” — it’s: Did your child pay more than 50% of their total support (living expenses)?
If not, Kiddie Tax may still apply to the child’s investment income.
3️⃣ 2025 Earned vs Unearned Income — How the IRS Decides
- ① Earned Income Amount — how much your child earned from work
- ② Self-Support Test — whether the child paid over half of total support
- ③ Student Status — full-time students ages 19–23 face stricter dependency rules
- First $1,350 of unearned income → tax-free
- Next $1,350 → taxed at the child’s rate
- Over $2,700 → taxed at the parents’ marginal rate
| Category | Earned Income | Unearned Income |
|---|---|---|
| Examples | W-2 job, freelance work, self-employment | Interest, dividends, stock/ETF gains, UTMA income |
| Kiddie Tax | ❌ Not directly taxed | ⭕ Subject to Kiddie Tax |
| Main IRS Focus | Self-support test | Dollar threshold ($2,700 tier in 2025) |
4️⃣ Real-World Example: W-2 Job + UTMA Income
- Age: 20, full-time college student
- W-2 earnings: $13,200
- UTMA dividends: $1,950
- UTMA capital gains: $1,300
- Total unearned income: $3,250
- Annual living expenses: $24,500
Even with a job, the student did not cover more than half of total support.
Result: Kiddie Tax can still apply to the child’s unearned income.
- $1,350 → tax-free
- $1,350 → child’s rate
- $550 → parents’ marginal rate
Takeaway: Earned income helps, but support percentage is what often decides the outcome.
5️⃣ EA Tips for Parents (Including NY State Notes)
- A job alone does not eliminate Kiddie Tax — support ratio matters most
- Freelance/gig income may create self-employment tax in addition to income tax
- Earned income can support Roth IRA contributions (long-term planning win)
-
If the child is claimed as a dependent, their standard deduction is generally the greater of
$1,350 or (earned income + $450), capped at the standard deduction for their filing status (for 2025, Single = $15,750). - Dividend-heavy UTMA portfolios increase Kiddie Tax exposure — review the mix
- NY tip: New York filing outcomes can differ by scenario. Be cautious with elections that shift a child’s investment income onto the parent’s return, and consider whether a separate NY return for the child is more favorable.
✅ Google FAQ — What Parents Ask Most
Q1. If my child earns $12,000 from a job, does Kiddie Tax disappear?
No. Kiddie Tax is driven by unearned income and the child’s dependency/student status. Earned income may help, but the self-support test is often the deciding factor.
Q2. Is all UTMA income taxed at the parents’ rate?
No. For 2025, only the portion of unearned income over $2,700 is taxed at the parents’ marginal rate.
The first $1,350 is tax-free and the next $1,350 is taxed at the child’s rate.
Q3. Does a 1099 job change anything?
Yes. 1099 income can trigger self-employment tax and additional filing considerations, separate from Kiddie Tax.
This article is for general informational purposes only and is based on U.S. federal tax law for the 2025 tax year.
Individual results may vary based on income, dependency status, and state tax rules.
Consult a qualified tax professional before filing.
핑백: Fringe Benefits 2025: Which Employee Benefits Are Tax-Free vs. Taxable? — W-2 & Payroll Compliance Guide (Updated: Jan 2026)