Rev. date: 09/24/2012
The following two rules may affect the tax on the investment income of certain
children:
- If the child's interest, dividends, and other investment income total more than $1,900, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. See
Instructions 8615,
Tax for Certain Children Who Have Investment Income of More Than
$1,900, or
- If the child's interest and dividend income (including capital gain distributions) total less than $9,500, the child's parent may be able to elect to include that income on the parent's return rather than file a return for the child. See
Form 8814,
Parents Election To Report Child's Interest and Dividends.
For either rule to apply, the child must be required to file a return. See
Publication 929,
Tax Rules for Children and Dependents, for filing requirement information.
Part of a child's investment income may be taxed at the parent's tax rate
if:
- The child's investment income was more than $1,900
- The child meets one of the following age requirements:
- The child was under age 18 at the end of the tax year
- The child was age 18 at the end of the tax year and the child's earned income does not exceed one-half of the child's own support for the year,
or
- The child was a full-time student who was under age 24 at the end of the tax year and the child's earned income does not exceed one half of the child's own support for the year (excluding
scholarships)
- At least one of the child's parents was alive at the end of the tax
year
- The child is required to file a tax return for the tax year, and
- The child does not file a joint return for the tax year
The child's tax is figured on
Form 8615,
Tax for Certain Children Who Have Investment Income of More Than
$1,900. This form must be attached to the child's tax return.
A parent may be able to avoid having to file a tax return for the child by including the child's income on the parent's tax return. A parent can elect to do this if all of the following conditions are
met:
- At the end of the tax year the child was under age 19 or under age 24, if a full-time
student
- The child's interest and dividend income was less than $9,500 for the tax
year
- The child had income only from interest and dividends, which includes Alaska Permanent Fund dividends and capital gain
distributions
- No estimated tax payments were made for the tax year, and no prior tax year's tax overpayment was applied to the current tax year, under the child's name and social security
number
- No federal income tax was withheld from the child's income under backup
withholding
- The child is required to file a return unless the parent makes this
election
- The child does not file a joint return for the tax year
- The parent is the parent qualified to make the election or files a joint return with the child's other
parent
To make this election, attach
Form 8814,
Parents' Election to Report Child's Interest and Dividends, to your
Form 1040.
Refer to
Publication 929,
Tax Rules for Children and Dependents, for more information in general, including the following issues:
- Parents who do not file a joint return
- A child with capital gain distributions, and
- Other effects of the election on the parents' return