Ind & Biz Tax Return 

Under the Kiddie Tax rules, a portion of a child’s net unearned income is taxed at the parents’ federal marginal tax rate. The key point to understand here is that when the Kiddie Tax applies, part of the child’s net unearned income may be subject to a higher federal income tax rate than it would otherwise be. [See IRC Section 1(g) and former IRC Section 1(j)(4).