We are all familiar with the rules about gifting to children and grandchildren- the $14,000 per person per recipient annual limits, but often overlooked are other potential consequences. Accumulated gift can expose kids to the kiddie tax. Congress enacted the kiddie tax in 1986 to prevent people from putting assets in their childrens names to avoid taxes, as children often have far lower tax rates than their parents. Under the rules, a childs unearned investment income, such as dividends, interest, and capital gains above $2,100 in 2016 is taxed at the parents top rate. So if the parents dividends are taxable at 23.8%, the childs dividends are as well, even if the childs rate would otherwise be 0%. Originally the kiddie tax applied to children under age 14. Over time lawmakers have expanded it to cover virtually all children under 19 and many who are older, including full-time students up to age 24 if they can be claimed as dependents on a parents return. Under the rules, the first