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I have two nieces that we are setting up custodial accounts for (the type that the assets actually belong to the kids with an adult to make transactions until the child is of age). My understanding is that the account is taxed at the child's tax rate. The accounts will have about $1500. One child is 15 and the other is 12 years old. Since the first $700 of unearned income is not taxed, do we have to file a tax return or complicate their parent's return for these accounts (as long as the gains are under $700)? This will be the kids' only income.

I have heard the $700 limit a number of times but always in connection with kids under 14. Does it still apply to the 15 year old?

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