The new tax law profiled in last week's edition further tightens the so-called "Kiddie Tax".  Putting more tax pressure on wealthy parents who make gifts to their children in order to take advantage of the lower tax rate on children's investment income, Congress is once again tightening the loop by pushing children's income into their parent's higher tax rate.

Congress intended to cut back on abuses of this gifting strategy, effectively eliminating many of the benefits.  The changes could also effect parents who have made gifts of stock and other securities to a child. Congressional estimates predict this change will raise more than $1.4 billion over the next decade.

There was an excellent review of this particular change in the tax code in a recent Sunday edition of the Wall Street Journal.  You can read the article here:
http://online.wsj.com/public/article/SB118082247846622793.html?mod=sunday_journal_primary_hs

One area where experts agree you can find a more tax-attractive way to save while still benefiting your children is through 529 college-savings plans.  Because investments in these accounts aren't subject to the Kiddie Tax, and because they allow a broad range of uses while maintaining parental control, 529 plans can be an excellent way to save taxes while smartly planning for your child's education.  Contributions are made with after-tax dollars, but the money comes out tax free for educational expenses.  

For more help with these tax law changes, you can contact our Tax Department.  And for advice on 529 plans, contact our friends at Anchor Financial Group.