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Key Tax Rules

Kiddie Tax Rules

The Kiddie Tax rules require the unearned income of a child or young adult be taxed at the greater of the child's or parents' marginal tax bracket once the unearned income exceeds $2,000. Under the Kiddie Tax rules, the first $1,000 in unearned income is not subject to tax. The next $1,000 of unearned income is taxed at the child's rate. Then, any unearned income of more than $2,000 is taxed at the parents' marginal rate. The Kiddie Tax rules apply to unearned income of the following:

  • A child under age 18 at the end of each tax year
  • An 18-year-old whose unearned income does not exceed one-half of his or her support
  • A 19- to 23-year-old full-time student whose income does not exceed one-half of his or her support


Individual Dividend Rates

Individual Dividend Rates
  Maximum Rate Rate for Qualified Dividends*
Taxpayers in the 39.6% Bracket 39.6% 20%
Taxpayers Above the 25% Bracket 35% 15%
Taxpayers in the 25% Bracket and Below 25% 0%

*"Qualified dividends" generally means dividends received during 2011 from domestic corporations. The investor must own the stock for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. These periods are doubled for preferred securities.

Capital Gains Tax Rates

Description of Capital Gains Tax Rates
Holding Period Maximum Rate* Effective Maximum Rate with 3.8% Surtax
Assets Held One Year or Less 39.6% 43.4%*
Assets Held More than One Year and Sold by
Individuals in the 39.6% Tax Bracket or Above
20% 23.8%*
Assets Held More than One Year and Sold by Individuals in the 25% to 35% Tax Bracket 15% 18.8%**
Assets Held More than One Year and Sold by
Individuals in the 15% Tax Bracket or Below
0% 0%

*The additional 3.8% Medicare surtax will apply to these taxpayers.

**The additional 3.8% Medicare surtax may apply to these taxpayers.


The information provided in these web pages is based on internal and external sources believed reliable; however, the accuracy and completeness of the information is not guaranteed and the figures may have changed since the time of printing. Examples are hypothetical illustrations and not intended to reflect the actual performance of any particular security. Please consult your tax advisor for questions relating to your individual situation.

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