Under certain circumstances, parents can elect to report their children’s UGMA accounts on their own tax returns, thereby taking advantage of the “kiddie tax” or Tax on a Child's Investment and Other Unearned Income.

The amount is free of gift tax, up to a certain amount.But these accounts' earnings can be taxed either to the child or the parent.Reporting requirements depend on the amount of income the account generates and the beneficiary’s age.UGMAs are usually limited to these sorts of publicly traded financial assets; they cannot invest in speculative instruments, like derivatives, or buy on margin.UGMA accounts can be opened through a bank or brokerage institutions.

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