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Joan is 15 and a dependent of her parents. If she has $4,900 income from her...

Joan is 15 and a dependent of her parents. If she has $4,900 income from her trust fund this year, how much income tax will she pay for 2018 if her parents have $150,000 of taxable income?

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Answer #1

Begining from 2018 to 2025, the Tax Cuts and Jobs Act changes the rates for the Kiddie Tax. During these years, children's unearned income will not be taxed at their parents income tax rates. Instead,
all net unearned income over a threshold amount--$2,100 for 2018--is taxed using the brackets and rates for trusts and estates. These are shown in the following chart :

Therefore,

Taxable income for Joan = $4,900 - $2,100 =$2,800

0 - $2,550 at 10% = $2,550 * 10% = $255

$2,550 - $2,800 at 24% = $250 * 24% = $60

So, total income tax for Joan = $255 + $60 = $315

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