How Can I use the Kiddie Tax?

The Small Business and Work Opportunity Tax Act of 2007 introduced a number of tax incentives for small business, but included a few pitfalls for individuals. For 2007, a child under the age of 18 is subject to the "kiddie tax" (and thus pays tax at his or her parents' highest marginal tax rate on unearned income in excess of $1,700).

But in 2008, the applicable age rises and the kiddie tax will apply to a child under the age of 19 and full-time students under age 24. In light of this development, parents should consider selling appreciated stock and other assets belonging to their children now, especially if they will be in the 19 to 24 year-old category next year.

Answer Provided by Andrew Taylor, CPA - Haffley,Taylor & Company

How can I reduce my 2007 taxes - Gift-giving

Take advantage of the 2007 annual and lifetime gift-giving limits to reduce your income and estate tax liabilities. For 2007 and then again in 2008, you can transfer $12,000 per person, per year, without paying gift tax on the amounts transferred.

Married couples can gift $24,000 per person, per year without tax liability on the amounts transferred. That strategy not only avoids the possibility of paying a hefty estate tax later, but it removes earnings from those gifts from your taxable income bracket into that of the lower-bracket gift recipient.


Answer Provided By Andrew Taylor, CPA - Haffley, Taylor & Company