Which tax rule applies to children under age 18 with unearned income over $1,900?

The Kiddie Tax applies to children under the age of 18 who have unearned income exceeding a specified threshold. This tax rule is intended to prevent families from shifting income to children to benefit from lower tax rates. For the tax year in question, the threshold is $1,900, meaning that any unearned income (such as dividends, interest, or capital gains) above this limit is taxed at the parent's marginal tax rate rather than the child's rate.

The standard deduction does not solely pertain to unearned income; instead, it applies to taxable income calculation. The dependent exemption has been suspended through 2025 under current tax law, making it irrelevant for this question. The earned income credit applies to individuals with earned income, which does not include unearned income, and is thus not applicable for children with unearned income. Hence, the Kiddie Tax is specifically designed for this scenario with unearned income exceeding $1,900.