Page 2 December 19, 2013 Finance Understanding the ‘Kiddie Tax’ By Jason Alderman For something that’s nickname sounds so innocent, the “kiddie tax” certainly can wreak havoc on unprepared taxpayers’ yearly returns. Congress first introduced the kiddie tax as part of the Tax Reform Act of 1986 to discourage wealthy parents from sheltering their investment income in accounts under their children’s names, thereby avoiding paying taxes on the amounts. The rules have been tweaked periodically ever since. Although the kiddie tax once applied only to the unearned income of children under 14 (hence the nickname), it now impacts all children under age 19 (as well as full-time students Shilpark paint 15617 Hawthorne Blvd Lawndale, CA 90260 (310) 676-6760 under 24), provided their earned income does not exceed half of the annual expenses for their support. Moreover, the kiddie tax is not just a wealthy person’s problem: Any outright gifts parents or grandparents bestow on young children, whether to avoid triggering the gift tax or simply out of generosity, could actually be generate investment earnings that would be subject to the kiddie tax if they exceed a threshold amount. Here’s a primer on how the kiddie tax works and whom it impacts: As it does with adults, the IRS differentiates between income children earn (paper routes, summer jobs, etc.) and unearned investment income they receive such as interest, dividends and capital gains – usually by way of accounts opened in their names by parents. Taxation of the first $1,000 of a child’s unearned income is generally offset by the $1,000 standard tax deduction for dependents and thus won’t be taxed; the next $1,000 is taxed at the child’s own income-tax rate (e.g., it’s 10 percent for taxable income up to $8,925). However, all unearned income over $2,000 is taxed at the parent’s marginal tax rate, which Recycle with PaintCare Leaking, unlabeled and empty containers are not accepted. Sites have limits; please call ahead to check hours and whether the site can accept your amount of paint. For other sites: www.paintcare.org or 855-724-6809. Do you know what to do with leftover cans of paint? With PaintCare, recycling unwanted paint is simple and convenient. Just bring it to your local drop-off site and we’ll take it from there. Police Reports ROBBERY 14600 S LEMOLI AV Date/Time Reported Mon 12/2/13 02:08 Property Taken: approximately $7000 in US currency mostly $1 bills, 32gb black ipad tablet, 64gb white 12400 S YORK AV Date/Time Reported Tue 12/3/13 11:54 Property Taken: social security card, California I.D., Allien registration card, unknown denomination, black vinyl wallet 14000 S CHADRON AV Date/Time Reported Tue 12/3/13 16:52 Property Taken: misc. bills, vic. I.D., victoria secret, pink, misc. papers and letters., small clutch wallet 12700 S CRENSHAW BL Date/Time Reported Wed 12/4/13 21:45 Property Taken: buzzball brand mixed alcoholic drinks ($2.99 ea) 3100 W EL SEGUNDO BL Date/Time Reported Wed 12/4/13 23:20 S CRENSHAW BL/W EL SEGUNDO BL Date/Time Reported Sat 12/7/13 17:30 12600 S CRANBROOK AV Date/Time Reported Sun 12/8/13 08:51 Property Taken: currency, black tri-fold wallet with ID, SS card, and debit, US currency mixed denominations, CDL S LEMOLI AV/W ROSECRANS AV Date/Time Reported Sun 12/8/13 16:40 BURGLARY 11600 S FREEMAN AV Date/Time Reported Mon 12/2/13 18:45 5000 W 118TH PL Date/Time Reported Mon 12/2/13 19:30 Property Taken: security safe containing misc paperwork, $80 cash, brown wallet w/ sticker of whi flower 11900 S RAMONA AV Date/Time Reported Mon 12/2/13 20:28 11800 S GREVILLEA AV Date/Time Reported Tue 12/3/13 13:37 Property Taken: misc, unknown amount of mail stolen from locked mailbox 5200 W 137TH ST HOUSE Date/Time Reported Tue 12/3/13 15:32 13600 S YUKON AV Date/Time Reported Tue 12/3/13 21:03 Property Taken: US currency, (Salah Ibrahim), galaxy cell phone, white, (8) watches, (6) silver, (2) gold US currency (Kirkolos Ibrahim), us currency (Mark Attia), sony laptop, silver 13000 S KORNBLUM AV Date/Time Reported Wed 12/4/13 06:45 Property Taken: blk coach purse square 5”x10”, vic-1 social security card, Mexico birth certificate, misc tax documents, sil box kit cont mac makeup/brushes/etc, silver guess watch 4700 W 135TH ST Date/Time Reported Wed 12/4/13 19:27 Property Taken: gray small safe, misc. silver and gold coins (unk make), wht imitation “louis vutton” purse, misc. paperwork belonging to Mercedes Gamboa 14000 S YUKON AV Date/Time Reported Fri 12/6/13 09:28 Property Taken: white marc jacobs wallet w/$200.00,CDL, b of a crd, $500.00, $2,300.00 in cash 2700 W 120TH ST Date/Time Reported Fri 12/6/13 12:55 2700 W 120TH ST Date/Time Reported Fri 12/6/13 21:20 3700 W 139TH ST Date/Time Reported Sun 12/8/13 02:26 Property Taken: white ipad tablet, gray sony laptop, black women’s michael kors watch, silver women’s michael kors watch, black and gold women’s michael kors watch, orange women’s michael kors watch • Calendar All Cities Saturday, December 21 • Kwanzaa Celebration and Children’s Kwanzaa Karamu, 1 p.m., AC Bilbrew Library, 150 E. El Segundo Blvd. For more information call (310) 538-3350. Ongoing • Recovery International Meetings, Fridays, 10 a.m., South Bay Mental Health Center, 2311 El Segundo Blvd. For more information call (310) 512-8112. Hawthorne Saturday, December 21 • Saturday Storytime, 10-11 a.m., Wiseburn Library, 5335 W. 135th St. For more information (310) 643-8880. Tuesday, December 24 • City Council Meeting, 6-10 p.m., City Council Chambers, 4455 W 126th St. For more information call (310) 349-2915. Saturday, January 4 • Family Game Day, 2-4 p.m., Hawthorne Library, 12700 Grevillea Ave. For more information call (310) 679-8193. Ongoing • Hawthorne Museum open Tuesdays 10 a.m.-2 p.m. and Saturdays, 11 a.m.-1 p.m, Hawthorne Museum, corner of 126th and Grevillea Ave. Inglewod Upcoming • Clean Christmas trees, up to10 feet in length without stands and ornaments, will be picked up curbside on regularly scheduled service day December 26- January 11. Monday, December 30 • Kids’ Crafts, 2 p.m., Inglewood Library Children’s Room, 101 W. Manchester Blvd. For more information call (310) 412-5645. Ongoing • Third Tuesday Family Movie at the Library. 10 a.m. Gladys Waddingham Library Lecture Hall, Main Library, 101 W. Manchester Blvd. Call 310-412-5645 for more information. Lawndale Friday, December 20 • Garden Work Days for Adults, 1-2 p.m., Lawndale Ocean Friendly Garden, 14616 Grevillea Ave. For more information call (310) 676-0177. Thursday, December 26 • Library 100th Anniversary Party, 4-5 p.m., Lawndale Library, 14615 Burin Ave. For more information call (310) 676-0177. Upcoming • Christmas Tree Recycling – Go Green. Consolidated will pick up holiday greenery with regular trash beginning Dec. 26 – Jan. 9. Remove all ornaments, flocking and stands before placing at the curb. Ongoing • Lawndale Farmers Market, every Wednesday, 2-7 p.m., 147th St. in front of Lawndale Library. For information call (310) 679-3306. • Commodities Free Food Program, every Wednesday at 10 a.m., Community Center, 14700 Burin Ave. For information call (310) 973-3270. • “Christmas is not a time nor a season, but a state of mind. To cherish peace and goodwill, to be plenteous in mercy, is to have the real spirit of Christmas.” ~ Calvin Coolidge can be as high as 39.6 percent for married couples with taxable income over $450,000. There are two ways to report your child’s investment income to the IRS: File a separate return for your child using IRS Form 8615; or include it on your own tax return, using IRS Form 8814 – the latter only works if they had no earned income to report. The tax owed will be the same either way. Important note: Although including your children’s investment income on your return may be more convenient, doing so could increase your adjusted gross income so much that you become subject to the alternative minimum tax or ineligible for certain income-based deductions and credits. For example, eligibility for the American Opportunity Tax Credit begins phasing out for individuals whose modified adjusted gross income exceeds $80,000 ($160,000 for married couples). Other kiddie tax rules: To be considered fulltime students, children must attend school full time during at least five months of the year. The kiddie tax does not apply to children who: are 19 to 23 and not full-time students; provide more than half of their own support from earned income; are over 24 and still dependents of their parents; or under 24 but married and file a joint tax return. These children are all taxed like adults at their own tax rate. Remember, gifts themselves are never taxable to the recipient. If a gift generates unearned investment income, however, that’s when taxation comes into play. Also, any gifts over $14,000 per individual, per year, will trigger the gift tax – although most of us will never come close to the $5.25 million lifetime gift exemption. For more details on tax filing requirements for children, see IRS Publication 929, “Tax Rules for Children and Dependents.” • “I will honor Christmas in my heart, and try to keep it all the year.” ~ Charles Dickens
Lawndale 12_19_13
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