Our son is a U.S. citizen (5 years old) and has some capital gains that are subject to U.S. tax. We live abroad, and both of us (the parents) are non-U.S. citizens who are not required to file U.S. tax returns.
I understand that for the Kiddie Tax, any unearned income above $2,600 is normally taxed at the parents’ marginal tax rate. But since we don’t file U.S. taxes, we don’t have a U.S. taxable income or a U.S. tax rate.
Does anyone know what tax rate applies in this situation? I’ve searched everywhere but can’t find a clear answer. Has anyone dealt with this before?
Kiddie Tax for Child of Nonresident Alien Parents
byu/hilola2 intax
Posted by hilola2
2 Comments
Kiddie tax is defined at IRC section 1(g), and applies only to IRC section 1 tax. Under section 871(b), nonresident aliens are only taxed by section 1 to the extent they have income effectively connected with US trade or business.
If the parents don’t have any such income, then kiddie tax doesn’t have any practical effect.
Kiddie tax doesn’t apply; your son will pay tax at his own rate. [https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens](https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens)