In 1986, a tax law was introduced to block parents from transferring investments to their children as a technique to lower their taxes. This law, commonly known as the kiddie tax, ensures that this unearned income is taxed at a parent’s, usually higher, tax rate. But there is still a tax planning opportunity. The term “kiddie tax” was introduced by the Tax Reform Act of 1986. The IRS introduced this rule to keep parents from shifting their investment income to their children and have this income taxed at their child’s lower tax rate. The law requires a child’s unearned income

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