You put a brokerage account in your kid's name because you figure their tax rate is lower than yours. That is exactly the move the kiddie tax was written to catch.

The rule is simple in concept. When a child has unearned income, the tax code can require that some of it be taxed at the parent's marginal rate, not the child's. The idea is to remove the incentive to shift investment assets to your kids just to get a lower bracket.

Unearned income is basically what it sounds like — taxable income your child didn't earn by working. Think interest, dividends, capital gains, and distributions that show up on a tax form with their Social Security number on it. Wages from an actual job are earned income and are treated differently.

That is why you are hearing about this again with Trump accounts. Those accounts went live on July 4, 2026, and the design lets a child withdraw or convert to Roth starting on January 1 of the year they turn age 18. At least part of that withdrawal or conversion will likely be taxable, and that is where the kiddie tax can come into play.

If you are holding investments for a child, the practical check is whose rate will actually apply when the income is recognized. You cannot fix it after the fact by filing the child's return separately. The time to think about it is before you realize the gain, take the distribution, or do the conversion, and to run the decision through your own return as well as your child's.