Beware of Kiddie Taxes When You Leave Heirs Your IRA
The Tax Cuts and Jobs Act has imposed a major change on how children are taxed on unearned income, which includes required minimum distributions from inherited IRAs. The result? Tax rates on these required distributions now could be a lot higher.
A kiddie tax, as it is better known, is imposed on a child's investment income above an exemption amount, which was $2,100 in 2018 and is $2,200 in 2019.
Prior to 2018 the tax rate used for a child's unearned income was the same as
