Kiddie tax on Trump accounts opens at 18; plan the window

Contributions to Trump accounts went live on July 4, 2026. Ed Slott's IRAHelp is already flagging January 1 of the year a child turns 18, the point at which accumulated funds become available for withdrawal or a Roth conversion. At least part of any such move will likely be taxable, and that taxable portion can bring the kiddie tax into play.

The kiddie tax is a rate rule, not a separate tax. It taxes a child's unearned income at the parent's marginal rate rather than the child's, and it exists to keep families from shifting investment assets into a child's name to obtain a lower bracket. Taxable IRA and retirement plan distributions, including Trump account withdrawals and conversions, count as unearned income. A child's summer-job wages are earned income and escape the rule.

For 2026, the first $2,700 of a child's unearned income falls outside the parent's rate. The first $1,350 is entirely tax-free, the next $1,350 is taxed at the child's own rate, and anything above the threshold is taxed at the parent's rate. The threshold is inflation-indexed, so it will climb.

Two exceptions keep the kiddie tax from ever applying. It does not apply in a year when the child is not required to file a federal income tax return, and it does not apply if neither parent is alive at year-end. In many cases, the rule stops applying in the year the child turns 24; IRAHelp suggests delaying withdrawals or conversions until then, when a child's income is likely to be taxed at their own rate.

When the kiddie tax does apply, the child typically files their own return and attaches Form 8615. Alternatively, if certain conditions are met, the parents may report the child's unearned income on their own return and pay the tax using Form 8814. That election changes the family's overall return, so it should be modeled before the first withdrawal.

The core planning decision is the parent's marginal rate during the ages-18-to-24 window versus the child's after 24. A child heading into a high-paying field might be better off converting at the parent's rate to lock in a known cost. A child still in school or starting low is likely to face a modest rate at 24, which argues for waiting. Spreading conversions over several years can keep unearned income below the threshold, though the annual allowance is small against a six-figure balance.

The practical move is to run a tax projection before each child's age-18 year. The account balance, the parent's bracket, and the child's own income all shape the answer. A family can also use the $2,700 annual lane deliberately: withdraw that amount in a year, and the first half is free while the second half is taxed at the child's rate, with no parent-rate exposure. That won't empty a large account, but it could cover a car or a semester's tuition without inviting the parent's rate.

Trump accounts are new enough that the spending phase is barely on the radar. The kiddie tax is one of its first features, and the timing is predictable. Mark January 1 of each child's age-18 year, build the projection, and choose between waiting and converting a controlled amount at the parent's rate.