Kiddie Tax and Unemployment Benefits

As discussed in earlier posts, the American Rescue Plan, which was enacted on March 11, 2021 provides a retroactive exclusion for unemployment benefits received during 2020 (up to $10,200 per taxpayer).

For younger taxpayers who are subject to the kiddie tax, unemployment benefits in excess of the $10,200 exclusion received by the child are treated as unearned income for the purpose of the kiddie tax, and the kiddie tax applies to such benefits. 

The kiddie tax is computed on Form 8615, and it can apply to children under the age of 24 who are full-time students.