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Article Date:
July 2007


Word Count:
1288

 

 

New Law Changes Kiddie Tax to Destroy College Funding Strategies


Lawmakers wiped out tried-and-true tactics for getting the government to help with the cost of your child’s college with the new tax law (P.L. 110-28, The U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, signed into law by the president on May 25, 2007).

 

Lawmakers extended the punitive kiddie tax to include

 

·

all children age 18, and

·

full-time students age 19 through 23, if the student’s earned income does not exceed one-half of his or her support (most students would fail this support test).

Under the kiddie tax, the child’s unearned income over $1,700 is taxed at the parent’s highest marginal rate.1

 

Overview of Destruction

 

The new kiddie tax rule destroys both the gift-leaseback strategy and the gifting-of-appreciated-property strategy. Immediate planning is necessary to get current benefits and set the ... Log in to view full article.

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