hard · Certified Financial Planner General Principles
The Haddad household is in the 24% marginal tax bracket. They wish to fund their child’s college education and are comparing a Section 529 plan to a taxable brokerage account.
Which of the following is an accurate statement regarding the 'Kiddie Tax' in 2026?
- The 'Kiddie Tax' applies only to earned income, meaning the brokerage account's dividends will be taxed at the child's lower rate.
- The Kiddie Tax was repealed by SECURE 2.0 and no longer affects education funding decisions in 2026.
- A 529 plan's qualified distributions are subject to the Kiddie Tax if the beneficiary is under age 24.
- Unearned income above a specific threshold ($2,700 for 2026) is taxed at the parents' marginal rate rather than the child's rate.
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