MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

The $16,100 Rule Parents Need to Know About the Kiddie Tax

19 Aug 2026 · 1 min

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Mark Kohler explains the kiddie tax only applies to unearned income like dividends and capital gains, not wages. A child can earn up to $100,000 in wages tax-free if below the $16,100 federal filing threshold. If your child works for your business, you may skip payroll withholding.

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Here's the misconception that stops most parents. They think, oh, well, there's a kiddie tax. The kiddie tax applies to unearned income. That's when parents are trying to put capital or stock brokerage accounts in their kids' names to hide dividends or interest or capital gains. It doesn't touch wages. Kiddie tax does not apply. Your child can earn $100,000. They can earn $15,000 washing trucks. And if it's under $16,100, they don't pay any federal income tax. Now, if they work for someone else, there's going to have to be withholdings, but when they work for me, there's not.