In an effort to educate the next generation, we have a Raleigh local St. David’s School student, Katie Francis, here to answer what she thinks the term Kiddie Taxes means to her. Katie’s answer seems so simple, taxes you pay on a “kitty.”

And while it is quite simple it is actually a tax Congress et up as a portion of the Tax Reform Act of 1986. Before the act, parents and guardians with significant investments could place those investments in their children’s name in order to get a lower tax rate. With the Kiddie Tax in place parents are no longer able to take advantage of their children’s lower income rate.

It applies to all children who are 18 years of age or under or dependent full-time students under the age of 23. The tax applies to most unearned income that a child receives and does not apply to any salary or wages.