Kiddie Tax
The Kiddie Tax is a tax on investment income earned by persons up to 24 years old. Congress passed this tax to stop people putting assets in their children’s names for tax savings because of the children’s generally lower tax rates than their parents. A child’s unearned investment income (dividends, interest and capital gains) above $2,100 in 2015, is to be taxed at the parents’ top rate. The first $1,050 of a child’s investment income is exempt from income tax. The next $1,050 of investment income is taxed at the child’s tax rate.
See IRS Form 8615 and instructions. The Kiddie Tax does not affect a child's earned income, that is wages from a job. It does not apply to a child's investment income if the child provides more than half her own support.