To explain trends in income inequality among families with children in Taiwan from 1980 to 2006, we decompose changes in income inequality to the contribution of residence urbanization, family structure, education, and age of the primary wage earner in terms of compositional effect of family changes and income effect of labor market changes. Using annual data from the Survey of Family Income and Expenditures, we applied variance function regressions to analyze mean and variance across family income inequality. Our results indicate an increase in variance of one-third from 1980 to 2006. Between-group differences among various family subgroups was found to be the major source of worsening income inequality before 2000, and both within-and between-group differences among various family subgroups were equally responsible after 2000. We found that the compositional effects of increasing labor force participation for women, educational expansion, and urbanization are suppressors of family income inequality. Identified boosters of family income inequality included the compositional effects of increasing divorce rates and both economically disadvantaged single-parent and less educated parent families, as well as income disparities in single-parent, highly educated parent, and middle-aged and elderly parent families. Adapted from the source document.