Glendale CPA | Child’s Income
Special income tax rules may apply to some children who receive investment income. The rules may affect the amount of income tax and how to report the income. Here are some things to keep in mind when dealing with children who have investment income.
Investment income includes interest, dividends, capital gains and other unearned income, such as from a trust.
If your child’s total investment income is more than $2,000 then your tax rate may apply to part of that income instead of your child’s tax rate. Use form 8615, Tax for Certain Children Who Have Unearned Income, to see how this affects your child.
You may be able to include your child’s investment income on your income tax return if it was less than $10,000 for the entire year. If you make this decision, then your child would not have to file an income tax return for themselves. Use form 8814, Parents’ Election to Report Child’s Interest and Dividends, to figure out how to claim the income.
If your child’s investment income is more than $10,000 then your child must file their own return. You should file form 8615, Tax for Certain Children Who Have Unearned Income, with the child’s return.
Your child may be subject to the Net Investment Income Tax if they must file form 8615. Use form 8960, Net Investment Income Tax, to figure this tax.
If you have any questions, feel free to contact us at Dusseau & Makris, PC, your Glendale CPA firm.