A new law tightens the "kiddie tax" rules so shifting capital gains to students under age 24 will offer scant tax shelter, starting in 2008. However, the kiddie tax does not apply to married couples filing a joint return. At any age or school status, they can have up to $63,700 in taxable income and owe 5 percent tax on dividend income and long-term gains, in 2007.
What’s more, low-income married couples will qualify for a 0 percent tax rate in 2008, 2009, and 2010, under current law. Income brackets rise with inflation so the cap for married couples might be around $66,000 in taxable income in 2008.
If you have children who are married, below those income levels, giving them appreciated assets to sell can pay off. The children can sell the stock or mutual fund shares and owe little or no tax. It might make sense to implement this strategy in 2007 or 2008 because a future tax law might raise tax rates in later years.
