How to Report UTMA on Taxes: Kiddie Tax and Filing Methods

To report a UTMA account on taxes, you use the child’s Social Security number because the income legally belongs to the child, and then you either file a return in the child’s name or, if the account only produced interest and dividends under $13,500, elect to include the income on the parents’ return using Form 8814. Which method fits depends on how much the account earned and whether any securities were sold during the year.

Whose Return the Income Belongs On

A UTMA account is the child’s property from the moment money goes in. The custodian picks investments and signs paperwork, but every dollar of interest, dividend, or capital gain the account produces is legally the child’s income. The brokerage reflects this on the tax forms it issues. Any 1099 the account generates carries the child’s Social Security number, not the custodian’s, and the IRS expects the income to show up under that SSN.

Almost everything a UTMA account produces counts as unearned income: bank interest, bond interest, stock dividends, mutual fund capital gain distributions, and gains from selling appreciated securities. That category matters because the IRS treats a child’s unearned income under a separate set of rules, known collectively as the Kiddie Tax, rather than under the ordinary brackets that apply to wages.

When a Return Has to Be Filed

For 2026, a dependent child with more than $1,350 of unearned income is required to file a federal return.¹ The threshold matches the dependent standard deduction, so once income crosses it there is tax to pay. Below $1,350, no return is needed.

Between $1,350 and $2,700, the child owes tax at the child’s own rate and files a return. Above $2,700, the return must also include Form 8615, which is where the Kiddie Tax portion gets calculated.² There is one shortcut worth knowing: if the child’s total income is under $13,500 and consists only of interest and dividends, the parents can skip the child’s return entirely and pick up the income on their own.

The Two Reporting Methods

The IRS gives you a choice between filing a return in the child’s name or folding the account’s income into the parents’ return. The right method depends on what the account earned and what kinds of transactions ran through it during the year.

Filing the Child’s Own Return

The standard route is a Form 1040 in the child’s name. It is the only route when the UTMA account had capital gains from selling securities, when gross income hits $13,500 or more, or when the child also had earned income from a job. The return covers every source of income the child had, earned and unearned combined.

Once unearned income clears $2,700, Form 8615 gets attached to that 1040. The form asks for the parents’ names, Social Security numbers, and taxable income, because the IRS needs those figures to apply the parents’ marginal rate to the child’s net unearned income above the threshold.² If the custodian is a grandparent or someone other than a parent, expect to coordinate with the parents to gather those numbers.

A separate return handles anything the UTMA account can produce, including multi-line Schedule D sales. The cost is more paperwork and possibly a second preparation fee.

Reporting on the Parent’s Return

Parents can instead file Form 8814 and pull the child’s UTMA income onto their own Form 1040. The election is simpler but comes with strict eligibility rules. For 2026, all of the following have to be true:

The child’s only income was interest and dividends, including capital gain distributions from mutual funds.
Gross income was more than $1,350 but less than $13,500.
No estimated tax payments were made in the child’s name.
The child was not subject to backup withholding.³

The biggest disqualifier is selling securities. If the custodian sold any stocks or mutual fund shares during the year, as opposed to receiving capital gain distributions from a fund, Form 8814 is off the table and the child needs a return.⁴

Before making the election, look at what the extra income does to the parents’ AGI. Adding the child’s unearned income above $2,700 to the parents’ adjusted gross income can shrink or eliminate tax credits and deductions that phase out at higher incomes, including education credits and the child tax credit. For some families the convenience is not worth the lost benefits, and the separate return comes out ahead.

How the Kiddie Tax Calculates

The Kiddie Tax exists to keep families from parking investment income in a child’s name to get a lower rate. It splits the child’s unearned income into three tiers, each taxed differently. For 2026:

The first $1,350 is covered by the dependent’s standard deduction and is not taxed.
The next $1,350 is taxed at the child’s own rate, usually the 10% bracket.
Anything above $2,700 is taxed at the parents’ marginal rate.

Those thresholds come from the dependent standard deduction, which for 2026 is the greater of $1,350 or $450 plus the child’s earned income.³ A child with no job has a standard deduction of exactly $1,350.

Say a UTMA account throws off $4,000 in dividends for a child with no earned income. The first $1,350 is tax-free, the next $1,350 is taxed at 10% ($135), and the remaining $1,300 is taxed at whatever bracket the parents sit in. Parents in the 32% bracket owe $416 on that last slice. The higher the parents’ bracket, the more the Kiddie Tax costs.

Which Children Are Covered

The rules apply to a child who meets one of these age tests at year-end:

Under 18, regardless of the child’s income or support.
Age 18, if the child’s earned income did not cover more than half of the child’s support (scholarships do not count toward support).
Ages 19 through 23, if the child is a full-time student whose earned income did not cover more than half of support, again excluding scholarships.

The child also has to have at least one living parent at year-end and cannot file a joint return.⁵ The scholarship exclusion trips people up. A 20-year-old full-time student with $30,000 in scholarships and an $8,000 part-time job might look self-supporting, but only the $8,000 counts against the support test.

Reporting Sales and Cost Basis

When the custodian sells anything inside the UTMA account, the child realizes a capital gain or loss that goes on the child’s return. The gain is the sale price minus the cost basis, and getting the basis right is where custodians often stumble.

Assets in a UTMA account arrive as gifts, and gifted property carries the donor’s original basis. If a parent bought stock for $5,000 and later moved it into the UTMA account, the child’s basis stays at $5,000 no matter what the shares were worth on the day of the transfer.⁶ Selling later at $12,000 produces a $7,000 gain. This carryover basis rule applies to every asset the account holds.⁷

One wrinkle: if the stock’s fair market value was below the donor’s basis at the time of the gift, the basis for calculating a later loss drops to that fair market value, while the basis for a gain stays at the original higher figure. Most custodians never run into this, but it matters when someone transferred securities that had already dropped.

Capital gains count as unearned income for Kiddie Tax purposes. If they push the child’s total unearned income past $2,700, the excess is taxed at the parents’ rate. Gains on assets held longer than one year qualify for long-term capital gains rates, which can be 0% for a child with little other income.

What Changes When the Child Ages Out

The Kiddie Tax stops applying once the child clears the age tests. For most children that is age 19; for full-time students it lasts through age 23.⁸ From that point on, all the account’s unearned income is taxed at the child’s own rate and Form 8615 is no longer needed.

The custodianship itself ends somewhere between 18 and 25, depending on state law.⁹ When it does, the adult child takes full control and the custodian’s reporting responsibilities end. Cost basis still carries over from the original purchase dates, not from the handoff, so before the new account holder sells anything it is worth confirming the historical purchase prices with the brokerage.⁶

1
Internal Revenue Service. Check If You Need to File a Tax Return
2
Internal Revenue Service. Instructions for Form 8615 – Tax for Certain Children Who Have Unearned Income
3
Internal Revenue Service. Revenue Procedure 2025-32
4
Internal Revenue Service. Instructions for Form 8814
5
Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
6
Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust
7
Internal Revenue Service. Publication 551 – Basis of Assets
8
Internal Revenue Service. Topic No. 553 – Tax on a Child’s Investment and Other Unearned Income
9
Social Security Administration. SSA POMS – The Legal Age of Majority for Uniform Transfer to Minors Act