How the Kiddie Tax Traps Teen Investors and What to Do

Episode 17 of The Tax Strategy Podcast digs into a tax rule that surprises a lot of parents: the kiddie tax. Lucas walks Luna through how unearned income over $2,600 for kids under 19 gets taxed at the parents' marginal rate, not the child's lower bracket. They use a concrete example — a 16-year-old with $8,000 in stock dividends and a part-time job — to show how the tax bill jumps from roughly $160 to $1,760. The hosts explain why the IRS clamped down in the 1980s to stop wealthy families from shifting investment income to kids, and they offer three practical workarounds: shifting to growth stocks with lower dividends, using a 529 plan for college savings, and timing asset sales around the child's 19th birthday when the rules lift. They also touch on how the 2026 tax bracket changes might affect planning. A clear, actionable breakdown for any parent whose teen has a brokerage account. #KiddieTax #TeenInvestors #TaxPlanning #UnearnedIncome #IRS #TaxBrackets #Dividends #529Plan #GrowthStocks #CapitalGains #FexingoBusiness #BusinessPodcast #Finance #TaxStrategy #Parenting #InvestmentIncome #TaxTips #2026Tax Keep every episode free: buymeacoffee.com/fexingo