A UTMA account is opened under the minor beneficiary’s Social Security number, not the custodian’s. The child is the legal owner of every dollar in the account from the moment it’s deposited, so the child’s taxpayer ID is what the bank or brokerage reports to the IRS on year-end tax forms. The custodian’s name appears on the account for administrative purposes, and the custodian signs the paperwork and directs the investments, but the tax ID belongs to the minor.
That single fact drives most of what people want to know next: how the earnings are taxed, whether contributions trigger gift tax, when the child gains control, and how the account affects college financial aid.
If the Child Doesn’t Have a Social Security Number
A minor who is a foreign national or otherwise doesn’t have an SSN can use an Individual Taxpayer Identification Number instead. The IRS issues ITINs through Form W-7, and the applicant must provide original identity documents or certified copies from the issuing agency.1Internal Revenue Service. Obtaining an ITIN From Abroad The financial institution needs some taxpayer identification number tied to the minor before it can open the account.
What Child Ownership Means in Practice
Once assets go into a UTMA account, they belong to the child permanently. The donor can’t take them back, redirect them to another beneficiary, or change their mind later.2Social Security Administration. SI 01120.205 Uniform Transfers to Minors Act This is what separates a UTMA from a savings account you mentally earmark for a child but keep in your own name. The transfer is immediate and complete.
The custodian manages the property but doesn’t own it. Every spending decision has to serve the child’s benefit, and withdrawals for the custodian’s personal use, or for expenses that count as a parent’s basic legal obligation such as food, shelter, and clothing, can create real problems. A custodian who misuses UTMA funds acts as a fiduciary and can be sued by the minor for breach of that duty, with possible outcomes including compensatory damages, reimbursement of legal fees, and removal as custodian. Courts have also shifted the burden of proof to custodians who fail to keep clear records of how funds were spent.3HelpWithMyBank.gov. Uniform Gifts to Minors Act and Uniform Transfers to Minors Act Account
How the Earnings Are Taxed
Because the account belongs to the child, interest, dividends, and capital gains land on the child’s tax return. Congress anticipated that families might exploit this by parking large sums in a child’s name to reach lower brackets, so it created what’s commonly called the “kiddie tax” under Section 1(g) of the Internal Revenue Code.4Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
For the 2025 tax year, the kiddie tax works in three tiers. The first $1,350 of a child’s unearned income is covered by the child’s standard deduction and owes no federal tax.5Internal Revenue Service. Publication 501 (2025), Dependents, Standard Deduction, and Filing Information The next $1,350 is taxed at the child’s own rate, which is usually the lowest bracket. Anything above $2,700 is taxed at the parent’s marginal rate if that rate is higher than the child’s.6Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax) These thresholds adjust for inflation each year, so confirm the current figures for the filing year that applies to you. When a child’s unearned income crosses $2,700, IRS Form 8615 gets filed with the child’s return to calculate the additional tax.7Internal Revenue Service. Instructions for Form 8615 – Tax for Certain Children Who Have Unearned Income
Who Counts as a Child for This Rule
The kiddie tax isn’t limited to young children. It applies to any beneficiary who, at year-end, is under 18; is 18 with earned income that doesn’t exceed half of their own support; or is a full-time student aged 19 through 23 whose earned income doesn’t cover half of their support.6Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax) That last category catches many college students whose UTMA accounts have grown. At least one parent must also be alive, and the child can’t file a joint return.
Reporting the Child’s Income on the Parent’s Return
If the child’s only income is interest, dividends, and capital gain distributions totaling less than $13,500, the parents can elect to report that income on their own return using IRS Form 8814 rather than filing a separate return for the child.6Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax) It simplifies paperwork, but it can raise the parent’s tax bill because the child’s income gets added to the parent’s adjusted gross income. Run the numbers both ways.
Gift Tax on Contributions Going In
Every deposit into a UTMA account is a completed, irrevocable gift to the minor, so gift tax rules apply on the way in. For 2026, a donor can give up to $19,000 per recipient per year without triggering any reporting requirement.8Internal Revenue Service. Gifts and Inheritances A married couple can each give $19,000 to the same child, moving $38,000 into a single UTMA account in one year without a gift tax return.
Contributions above the annual exclusion don’t necessarily owe tax right away, but the donor has to file IRS Form 709, and the excess counts against the donor’s lifetime gift and estate tax exemption. Grandparents and other relatives who want to fund a child’s UTMA should coordinate with the parents so multiple donors don’t accidentally push past the exclusion for the same child in the same year.
When the Child Gets Control
The custodian’s authority ends when the beneficiary reaches the age of majority set by their state’s UTMA statute. That age ranges from 18 to 25 depending on the state, though 18 and 21 are the most common cutoffs.9Social Security Administration. SI SEA01120.205 – The Legal Age of Majority for Uniform Transfer to Minors Act A few states, including Alaska, Oregon, and Washington, let the original transferor specify an age as late as 25 when the account is set up.
Once the beneficiary reaches that age, they get unconditional access to the entire balance. No one can restrict how they spend it, and no mechanism extends the custodianship past the statutory age. A parent worried about a young adult receiving a large balance outright can consider a formal trust with specific distribution terms instead, though setup costs are higher.
Financial Aid Consequences
Because the account uses the child’s tax ID and is legally the child’s property, the federal financial aid system counts it as a student asset when the beneficiary applies for college aid. Under the FAFSA formula, up to 20% of a student’s assets count toward the aid calculation each year. Parental assets are assessed at a maximum rate of about 5.64% after allowances. That gap is significant: a $50,000 UTMA balance could reduce aid eligibility by roughly $10,000 per year, where the same $50,000 held in a parent’s name might reduce it by under $3,000.
Families report the account’s current market value as of the day they submit the FAFSA.10Federal Student Aid. How Do I Answer the Current Net Worth of Investments, Including Real Estate Question Starting with the 2024–25 award year, the older Expected Family Contribution was replaced by the Student Aid Index, but the steeper assessment rate for student-owned assets remains.