For a high-income family in California, the combined maximum tax rate on $2,600 could be 55.2% (37% federal + 14.4% state + 3.7% Net Investment Income Tax). By spending just a few minutes each year managing this, they could easily save approximately $1,400, which significantly exceeds my hourly rate working for big tech in Silicon Valley.UGMA/UTMA seem borderline useless to me. If you’re middle class, those assets can reduce financial aid under both FAFSA and the CSS Profile. If you’re earning $500k and too rich to qualify for financial aid anywhere, then you have the kiddie tax problem and getting to save capital gains taxes on $2600 a year is barely going to be worth the effort.
Furthermore, if you invest this extra $1,400 annually at an estimated compound interest rate of 8% for 18 years, it will grow to approximately $58,000 by the time the child goes to college.
Statistics: Posted by majiaknight — Tue Feb 11, 2025 11:48 pm — Replies 38 — Views 3161