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Do children need to pay taxes on investment earnings?

Children may earn interest, dividends and capital gains (if shares sold for higher than purchased) in their custodial account.  In 2015, children do not have to pay tax on any of these earnings up to $1,050.  The child does have to pay taxes on the next $1,050 in investment earnings, but at the child’s tax rate.  If the custodial account has earnings exceeding $2,100, special tax treatment will be required so that the gains are included on the parent’s return.