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Financial Planning Tips

Test Your UTMA Account Knowledge
(Updated: 03/13/2017)

True or false? Distributions from a Uniform Transfer to Minors Act (UTMA) account are taxable to the minor beneficiary of the account.

Answer: True.

Once money is deposited in an UTMA account, any earnings it generates are taxable to the minor, who is technically the owner of the account. In most cases, the Internal Revenue Service’s “kiddie tax” provisions will apply. Under the kiddie tax rules for 2017, children can claim the standard deduction against their first $1,050 of investment income, and they pay taxes at their tax rate on the next $1,050 of investment income. Anything they make from investments in excess of $2,100 is taxed at their parents’ rate.

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