March 30, 2022

How to explain custodial account tax rates to kids

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Investing can feel intimidating, but we're here to simplify it a bit. Your investing journey starts today!

Custodial accounts are taxed based on the income of the account. An investment account can earn income from dividends, bond payments, or buy selling stock. Custodial accounts have different tax rules than a brokerage account owned by an adult.  The custodial account rate can depend on the tax rate of both the child and the adult who set up the custodial account. 

Onu does not provide tax advice. Please consult with a tax professional regarding your personal circumstances.


The custodial account's income can be taxed differently at different stages of the child's life. Tax rates also depend on the account's growth. You should always ask your tax advisor for details if you want more clarity.

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