The kiddie tax — around since 1986 — came about as an effort to close a tax loophole for the wealthy. The idea was that taxing children's passive income at the same rate as their parents would eliminate a sneaky reallocation of money just to avoid taxes.
The kiddie tax is a set of laws designed to stop parents from moving assets to their children to avoid paying taxes. It applies to unearned income — that is, income that doesn't come from working and being employed.
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