how is a custodial account taxed 
children file as part of their parent s tax return generally for the 2024 year any unearned income interest and dividends over the 2 500 threshold for ugma or utma custodial accounts may be taxed at the parent s rate as per irs requirements the bottom linea custodial account is a means by which an adult can open a savings account for a child the adult who opens the account is responsible for managing it including making investment decisions and deciding how the money is to be used as long as it benefits the child in some way there are specific tax advantages to a custodial account but there are also risks such as the possibility that the existence of the account limits the amount of financial aid a child might get for college weigh the pros and cons before deciding to open a custodial account 