Kiddie Tax

Jennifer and Mark have a 14-year-old son, Ryan, who earned $500 in wages from a part-time job and received $3,000 in interest income from an investment account set up by his grandparents. How will Ryan’s income be taxed under the "kiddie tax" rules for 2025?

  1. The entire $3,500 will be taxed at Ryan’s tax rate.
  2. The $500 in wages will be taxed at Ryan’s rate, and the $3,000 in investment income will be taxed at his parents' tax rate above the standard deduction for unearned income.
  3. The $500 in wages will be tax-free, and the $3,000 in investment income will be taxed at Ryan’s tax rate.
  4. The entire $3,500 will be tax-free because Ryan is under 18.