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Old 02-16-2018, 02:27 PM
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Join Date: Feb 2018
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How are Distributions from UTMA taxed for capital gains?

Hello - I have an UTMA set up for my son. It's invested in mutual funds and has done very well. This year I've taken several distributions for the benefit of my son that total around $20k. Much of that is cap gains. He just turned 18 this year and started working, so he has his own tax forms to fill out.

My question is how are the gains from the distributions taxed? Do I report them on my tax forms and get hit at my tax rate? Or can they be taxed at his rate, which is much lower since he has income <$3k?

Also, now that he's age of majority, should I re-register the account in his name solely? What are the benefits/drawbacks from doing that?

Thank you!



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Old 02-18-2018, 06:38 AM
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Join Date: Oct 2010
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My question is how are the gains from the distributions taxed? ===========> Generally, your child is affected by the Kiddie Tax since his unearned income, capital gain, exceeds $2,100 and he is under age of 18 at the end of 2017.




Do I report them on my tax forms and get hit at my tax rate? ====>>since the income earned by the UTMA account belongs to your child, so you have a choice. If your child is younger than age 19 or a full-time student age 19-23, he or she must file a tax return; since your child is younger than 19 or a full-time student age 19-23 and is required to file his return, you may be able to report the child's unearned income on your return using Form 8814. If you do, the child is not required to file a return. However, in most cases it's better to report the income on the child's return to avoid taxes on the gain

Or can they be taxed at his rate, which is much lower since he has income <$3k?=====>You may choose either of them as mentioned above.

Also, now that he's age of majority, should I re-register the account in his name solely? What are the benefits/drawbacks from doing that?============> He will no longer be a minor so, technically speaking, the account should just be retitled in his name. For all practical purposes, it won?t matter if you change the name or not ? it?s still his and he?s still an adult.



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