Tax rate for kids under 18

Kids 8–12 · Explainer · Updated October 1, 2026 · LearnLife Editorial

What is the tax rate for kids under 18 and why does it matter?

The tax rate for kids under 18 is the percentage of money they earn that the government requires them to pay as taxes. This applies to money earned through work or investments. Kids don’t always have to pay taxes, especially if they earn small amounts, but when earnings rise above certain limits, taxes kick in. This matters because many kids start earning money from chores, babysitting, or part-time jobs, and families need to understand when tax forms must be filed and when taxes are owed. Knowing the tax rate helps kids learn about responsibility and money management. For example, if a 12-year-old earns $2,000 from summer jobs and doesn’t know about taxes, they might be surprised when they need to file forms or pay taxes. Parents and teachers can use this topic to introduce kids to how money works in real life.

Kids under 18 are usually claimed as dependents on their parents’ tax returns, so the IRS has special rules to make sure families don’t get taxed twice on the same income. This is why kids’ income might be taxed differently than adult income. The “kiddie tax” is one such rule, designed to apply parents’ tax rates to certain unearned income of kids to prevent tax avoidance. Understanding these facts helps families plan savings, earnings, and filing.

How does earned income taxation work for kids?

“Earned income” means money kids make by working, like getting paid for chores, babysitting, lawn mowing, or a part-time retail job. The IRS allows kids to earn a certain amount before they have to pay income taxes. This amount, called the standard deduction, changes each year. For example, if the standard deduction is $1,200, a kid earning $1,000 from babysitting won’t owe federal income tax and might not need to file a tax return.

If a child earns more than the standard deduction, they must file a tax return. The amount above the deduction is taxed at the child’s tax rate, which usually starts at 10%. For example, a kid who earns $3,000 at a summer job would subtract the standard deduction ($1,200) and pay taxes only on the remaining $1,800. Ten percent of $1,800 means $180 owed in taxes.

Steps parents and kids can follow:

1. Track all money earned, including paychecks or cash payments.
2. Check the IRS website or ask a tax professional for current standard deduction amounts.
3. If earnings exceed the deduction, prepare to file a tax return using Form 1040 or 1040-SR.
4. Use free tax software or seek volunteer tax help programs if needed.

This helps kids learn good money habits, like saving part of their earnings for taxes and understanding paychecks and deductions.

How does unearned income affect kids’ taxes?

“Unearned income” includes money kids get from interest on savings accounts, dividends from stocks, or other investment earnings. It also includes income from trusts or gifts that produce income. If unearned income is small, kids might not owe taxes. But if it exceeds certain limits, the “kiddie tax” rule applies. This means the excess unearned income is taxed at the parents’ tax rate rather than the child’s lower rate.

For example, if a kid has $1,500 in interest from a savings account in one year and the threshold for unearned income is $1,100, the $400 above that will be taxed at the parents’ rate, which might be higher than the child’s rate. This stops families from moving income to kids to pay less tax.

What parents and kids should do:

• Keep track of all unearned income amounts during the year.
• Collect statements from banks or investment accounts showing interest or dividends earned.
• When filing taxes, use the specific IRS forms or worksheets that calculate the kiddie tax.
• Consider talking to a tax professional for help with complex investment income.

Understanding this helps kids and families with savings and investment plans and avoids surprises at tax time.

How do kids file taxes if they owe or need to report income?

If a child under 18 earns enough income that they must file a tax return, they typically use Form 1040 or 1040-SR. Parents can help with this process by gathering income statements such as W-2 forms from employers or 1099-INT forms from banks for interest earned.

Filing steps for kids and parents:

1. Collect all income documents (W-2s for jobs, 1099s for interest).
2. Download or request the IRS tax forms for children.
3. Fill out the tax return, reporting earned and unearned income.
4. Calculate deductions, including the standard deduction available to kids.
5. Determine if any tax is owed or if a refund is due.
6. Submit the return electronically or by mail, following IRS instructions.

Parents can use tax software designed for beginners to help kids file correctly. Filing taxes teaches kids responsibility and how the government uses taxes for public services.

What are common misconceptions about kids and taxes?

Many people think kids don’t pay taxes or that allowances and gifts count as taxable income. Actually, gifts, birthday money, or allowances usually aren’t taxable because they aren’t earned income or investment income. Taxes apply only to money kids earn or income their money generates.

Another confusion is about Social Security and Medicare taxes. If kids work for an employer, these taxes are usually withheld from their paychecks regardless of age. These taxes fund important programs and are different from income tax.

Some people also mix up when kids should file taxes. Filing is required only if income exceeds certain thresholds, but sometimes kids want to file even if they don’t owe taxes to get refunds of withheld taxes.

Correcting these misunderstandings helps parents and kids avoid filing errors and prepares kids to manage money well.

What should parents and kids do to stay prepared and informed?

Tax laws and limits change every year, so it’s important for parents and kids to check the latest IRS information annually. The IRS website updates standard deductions, income thresholds, and forms. Parents should save all income records and teach kids to keep simple records of money earned or received in interest.

Helpful tips:

• Use a dedicated folder or digital app to save pay stubs, bank statements, and tax forms.
• Review tax rules together each year before tax season.
• Consider consulting a tax professional for questions about the kiddie tax or complex income.
• Teach kids to save part of their earnings for taxes and other expenses.

This preparation reduces last-minute stress and helps kids become confident with money and taxes as they grow older.

How can parents and teachers explain taxes to kids in simple ways?

Parents and teachers can use everyday examples to help kids understand taxes. For instance, a lemonade stand is a great way to show how earning money leads to paying taxes. Kids can imagine earning $50 from selling lemonade and then learning that a small part of that money might be owed in taxes.

Ways to explain:

• Use simple words: “Taxes are a small part of money you earn that helps pay for things like schools and parks.”
• Practice filling out a pretend tax form with the kid’s earnings and deductions.
• Show kids their paychecks or bank statements and point out any tax withholdings.
• Use games or videos designed for kids about money and taxes.

Building these skills early helps kids understand their role as future taxpayers and money managers.

Frequently asked questions

Do kids have to pay taxes on money they earn from chores?

If kids get paid for chores and the total money earned is more than the IRS standard deduction for that year, they may need to file a tax return and pay income tax on the amount over the deduction. Many small amounts don’t require paying taxes, but it’s good to check.

What is the “kiddie tax” and how does it affect my child?

The kiddie tax is a rule that taxes a child’s unearned income above a certain amount at the parents’ tax rate. It prevents families from moving investment income to kids to pay less tax. It only applies if the child’s unearned income is above the limit set by the IRS.

Can kids get a tax refund if they paid too much tax?

Yes, if a child had taxes withheld from their paycheck but earned less than the tax threshold, they might qualify for a refund by filing a tax return. Filing helps them get money back.

Are Social Security and Medicare taxes taken out of kids’ paychecks?

Yes, kids who work for an employer usually have Social Security and Medicare taxes withheld, even if they are under 18. These taxes fund important government programs.

When should kids file their first tax return?

Kids should file a tax return if their earned or unearned income goes over the IRS filing limits for that year. Parents can check the IRS website or ask a tax professional for current rules.