Do I Have to Claim My Child’s Survivor Benefits on My Taxes?
Learn how child survivor benefits are taxed, who is responsible for reporting them, and how they may affect overall tax liability and potential refunds.
Survivor benefits provide crucial financial support for children who have lost a parent, but many caregivers are unsure whether these payments must be reported on tax returns. The tax treatment of these benefits depends on the child’s total income and filing requirements.
Tax Status of Child Survivor Benefits
Survivor benefits paid to a child are considered taxable income, but whether they result in a tax bill depends on the child’s total earnings. The Social Security Administration (SSA) does not withhold taxes from these payments, so any tax liability is determined when filing a return. These benefits are classified as unearned income, which follows different tax rules than wages or self-employment earnings.
If a child’s only income comes from survivor benefits and remains below a certain threshold, they may not owe taxes. However, if they receive additional income, such as dividends or interest, a portion of the benefits could become taxable. The IRS determines taxability using a formula based on modified adjusted gross income (MAGI), which includes half of the benefits received plus any other income.
A child with significant unearned income may be taxed at their parent’s rate under the “kiddie tax” rules, potentially increasing their tax burden. The IRS updates income thresholds annually, so checking the latest figures before filing is important.
Determining Who Must Report These Benefits
Who reports a child’s survivor benefits depends on whether the child is required to file a tax return. If the child has additional income that requires filing, they must report the benefits on their own return. If they are a dependent and do not meet IRS filing requirements, the benefits generally do not need to be reported by the parent or guardian.
For the 2024 tax year, a dependent child must file a return if their unearned income exceeds $1,300 or if their total income surpasses the standard deduction for dependents, which is the greater of $1,300 or their earned income plus $400, up to a maximum of $14,600. If survivor benefits are the child’s only income and remain below this threshold, they are not required to file.
If the child has other unearned income, such as interest or dividends, the parent may have the option to report it on their own return using IRS Form 8814, “Parents’ Election to Report Child’s Interest and Dividends.” However, this option does not apply to Social Security survivor benefits, which must be reported on the child’s return if required.
Calculating Potential Tax Liability
To determine whether survivor benefits are taxable, the IRS considers provisional income, which consists of half of the annual survivor benefits plus any additional taxable earnings. If this total is below $25,000 for a single filer, none of the benefits are taxable. If it exceeds this amount, a portion may be subject to tax.
Once benefits become taxable, the IRS applies a tiered system. Up to 50% of the benefits may be taxable if provisional income falls between $25,000 and $34,000, while up to 85% may be taxable for amounts exceeding $34,000. These thresholds remain constant each year. If the child has no other income, the taxable portion may still fall within the standard deduction, eliminating any tax liability. However, if they have earnings from a job or other unearned income, the taxable portion is added to their total income, potentially increasing their tax burden.
Interactions With Other Income Sources
A child’s survivor benefits may be affected by other income sources. If they earn wages from a part-time job, these earnings are taxed separately but still contribute to overall tax liability. Earned income does not directly impact the taxability of survivor benefits, but it may require the child to file a return if total income exceeds the filing threshold.
Investment income, such as capital gains or rental income, can further complicate taxes. If a child has significant unearned income, they may be subject to the “kiddie tax,” which applies the parent’s marginal tax rate to unearned income above $2,600 for 2024. This rule was designed to prevent parents from shifting income to their children to take advantage of lower tax rates, but it can also increase taxes for children receiving survivor benefits alongside investment income.
Possible Effects on Refund Amount
If a child’s survivor benefits are taxable, it can impact the household’s overall tax situation. Since the SSA does not withhold taxes from these payments, any owed amount must be paid when filing, which may come as an unexpected expense.
For parents who claim the child as a dependent, the taxability of these benefits does not directly impact their refund. However, if the child has additional unearned income that triggers the kiddie tax, it could result in a higher tax bill at the parent’s rate. Additionally, if the child has earned income and qualifies for credits like the Earned Income Tax Credit (EITC), taxable survivor benefits could affect eligibility by increasing total income.