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The Short Answer

The Ins and Outs of Kiddie Tax Rules

Helping kids invest for themselves can be a great idea--just be aware of the tax rules associated with it.


Question: I really want to teach my daughter about how investing works and let her see the magic of compounding for herself. She has picked out a stock she wants to buy-- Walt Disney (DIS). What should I know from a tax perspective? 

Answer: I applaud your efforts to teach your daughter about investing. Financial literacy is often an area that doesn't get enough attention in schools, so teaching it at home is a wonderful and worthwhile idea. But as you alluded in your question, the tax implications of having investments in your child's name can be complicated. 

Karen Wallace does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.