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.
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.