Here's how it works: Let's say a 22-year-old college student made $5,000 from investing. While the first $1,100 is tax-free, the student will owe levies on the next $1,100 at their rate.
Any profit above $2,200 is subject to kiddie tax charged to the parents at their rate, assuming the student is full-time and a dependent on their tax return.The deadline for brokerages to send, which focuses each account's gains and losses for 2021, was Feb. 15, so parents may soon find out if this is an issue.
"I think you need to use the 2021 tax year as a learning experience," Herron said."Especially if there were some unintended consequences."
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