If you decide to invest in your child's name, here are some tax strategies to consider:
-
You can shift just enough assets to create $2,100 in 2016 (same as 2015) taxable income to an under-19 child.
-
You can buy U.S. Savings Bonds (in the child's name) scheduled to mature after your child reaches age 18.
-
You can invest in equities that pay small dividends but have a lot of potential for appreciation. The dividend income earned when your child is under the age of 19 will be minimal with tax relief, and the growth in the stocks will occur over the long term.
- If you own a family business, you can employ your child in the business. Earned income is not subject to the "kiddie tax," and is deductible by the business if the child is performing a legitimate function. Additionally, if your business is a sole proprietorship and your child is younger than 19 years old, then he or she will not pay social security taxes on the income.
