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When:
January 01, 2003

Who it Affects:
For taxpayers who might have too many deductions.
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2003 Tax Law Changes
A break on the kiddie tax, a better break in '04

For minors under age 14 with investment income

This applies to unearned income of children who are 14 at the end of the year. This includes dividends, interest and the like.

Heres how unearned income for children under age 14 is treated:

  • The first $750 is tax-free.
  • The next $750 is taxed at the childs rate -- mostly likely 10%.
  • Amounts over $1,500 are taxed at the parents rate. The top rate for 2003 is 35%.
Here's what happens in 2004:
  • The first $800 is tax-free.
  • The next $800 is taxed at the childs rate -- mostly likely 10%.
  • Amounts over $1,600 are taxed at the parents rate. The top rate for 2003 is 35%.
Related Tax Article(s): Cut your taxes from cradle to grave