Home | Blog | “Kiddie Tax” – The SECURE Act

“Kiddie Tax” – The SECURE Act

The SECURE Act passed by Congress in December 2019 made important changes to retirement kiddie tax SECURE Actplans, but it also made a change to the ‘Kiddie Tax’.

Before the Tax Cuts and Jobs Act (TCJA), children with unearned income paid no tax on the first $1,100 of unearned income, and the next $1,100 was taxed at the child’s tax rate.  Earnings over $2,200 were taxed at the parents’ rate. TCJA changed that rate to the trust income tax rates, which could be much higher than the parent’s rate and created a substantial penalty on a child’s unearned income.

The change created some unintended, and surprising consequences. As noted by the Wall Street Journal*, in many cases survivors’ benefits paid to children of lost active-duty service members were taxed at rates substantially higher than their parents.

The SECURE Act repeals the TCJA change in the Kiddie Tax and is effective for 2020 and beyond. The SECURE Act includes the option to apply the rules to 2019 tax returns and amend 2018.

Contact us if you have questions about the above story or other US tax concerns.

* Please note, to read the Wall Street Journal a subscription may be required.

Here to Help

Here to Help

Contact one of our specialists

London
US Tax & Financial Services Ltd
3 Harbour Exchange Square
London E14 9GE
United Kingdom

T: +44 20 7357 8220

F: +44 20 7357 8225

Email Us

Zurich
US Tax & Financial Services Sarl
Brandschenkestrasse 20
CH-8001 Zurich
Switzerland

T: +41 44 387 8070

F: +41 44 387 8079

Email Us

Geneva
US Tax & Financial Services Sarl
Blvd. Helvetique 36
CH 1207
Geneva
Switzerland

T: +41 22 700 2500

F: +41 22 700 2526

Email Us

Middle East, Asia and the Americas
US Tax & Financial Services GmbH
Löwenstrasse 28
PO Box 1367
CH-8021 Zurich
Switzerland

T: +41 44 387 8070

F: +41 44 387 8079

Email Us

Nordics
US Tax & Financial Services Ltd / MAJATTORNEY
Norra Skeppsbron 5B
SE 803 10, GAVLE
Sweden

T: +46 26 18 82 22

M: +46 70 61 88 016

Email Us

Read Services in :EnglishFrenchItalianGerman