Lower Kiddie Tax

Physician's Money Digest, October15 2003, Volume 10, Issue 19

The new tax law lowers long-termcapital gains taxes for taxpayers in the10% and 15% brackets to 5%, anddown to zero in 2008. The implicationsfor parents who are saving fortheir children's college tuition are complex,but the bottom line is that youcan give your child stocks that havegone up in value, which the child canlater cash in to cover tuition costs andpay the lower capital gains tax on anyprofit. Some wrinkles: If the child hasa taxable income of more than$28,400, including gains on the stock,the long-term capital gains tax will be15% on any amount over the threshold.Also, you will be subject to the gifttax on any stock gift above the gift taxmaximum, which is currently $11,000per donor per year.