Laura Saunders, Being Generous to Your Kids? Don’t Stick Them With a Surprise Tax Bill (Wall Street Journal, June 19, 2026)

Are you feeling generous toward your children or grandchildren? Before opening your wallet, check whether your largess could yield a surprise tax bill for them. 

The reason is the “kiddie tax,” an often-overlooked levy that taxes the unearned income of children and grandchildren at the parents’ rates rather than the child’s. That can raise total income taxes on the family because the child’s rate is usually much lower. 

Here’s a simplified example: A grandfather wants to help his grandson with college tuition. He gives the young man $50,000 of highly appreciated stock to sell. The grandfather knows his own tax rate on the sale would be 23.8% and assumes his grandson won’t owe anything because he’s in the 0% capital-gains bracket. 

But that’s wrong. Because the grandson is 20 years old and a full-time student, he’ll owe tax at his parents’ rate instead of his own, above an exemption. If they would owe an 18.8% rate on the gain, which could be the case for an upper-middle-income couple, then the grandson will too. And if he owes, say, $5,000 of kiddie tax, that’s a far cry from the zero expected….