In our last blog post, we discussed who needs to report kiddie tax - the parent or the child.
Now the most important question - how to avoid kiddie tax?
The best way is to maximize the usage of the $2,000 threshold each year!
This means taking capital gains each year by selling stocks with smaller gains each year and then buying the stock back, creating a taxable event each year. The transaction also allows the cost basis on the investment to increase while using up some or all of the yearly $2,000 threshold.
Now the most important question - how to avoid kiddie tax?
The best way is to maximize the usage of the $2,000 threshold each year!
This means taking capital gains each year by selling stocks with smaller gains each year and then buying the stock back, creating a taxable event each year. The transaction also allows the cost basis on the investment to increase while using up some or all of the yearly $2,000 threshold.
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