Do I Need to Add My Child’s W2 to My Tax Return?
Confused about your child's W2 and your taxes? Learn when their income impacts your return and who files what.
Parents often wonder if their child’s W2 income needs to be included on their own tax return. The answer is not always simple and depends on various factors related to both the child’s circumstances and the parent’s tax situation. Understanding the specific rules regarding dependency status, filing thresholds for children, and the different types of income is important for accurate tax reporting.
Understanding Child Dependency Status
Determining tax obligations for a child’s income involves understanding whether the child qualifies as a dependent. The Internal Revenue Service (IRS) outlines specific criteria for a “qualifying child” dependent. Meeting these criteria allows a parent to claim certain tax benefits related to the child.
There are five main tests for a qualifying child:
- Relationship test: The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.
- Age test: The child must be under age 19 at the end of the tax year, or under age 24 if a full-time student, or permanently and totally disabled, regardless of age.
- Residency test: The child must have lived with you for more than half of the tax year, with exceptions for temporary absences like attending college.
- Support test: The child cannot have provided more than half of their own financial support for the year.
- Joint return test: The child cannot file a joint tax return for the year, unless the return is filed solely to claim a refund of withheld income tax.
If a child meets all these conditions, they can generally be claimed as a dependent.
Child’s Own Tax Filing Requirements
Even if a child is claimed as a dependent, they may still have their own tax filing requirements, particularly when they earn income. For the 2024 tax year, specific thresholds apply to earned income, such as wages reported on a W2, and unearned income, which includes interest and dividends.
A dependent child with earned income exceeding $14,600 for the 2024 tax year must file a personal income tax return. Earned income includes wages, salaries, and tips received from employment.
For 2024, if a child’s unearned income exceeds $1,300, they must file their own tax return. When a child has a combination of both earned and unearned income, they may be required to file if their total gross income exceeds specific limits, which can be the larger of $1,300 or their earned income plus $450, up to the standard deduction for a single taxpayer.
Even if a child’s income falls below the mandatory filing thresholds, filing a tax return can still be beneficial. If income tax was withheld from their W2 wages, the child would need to file a return to claim a refund of that withheld tax.
Parent Reporting of Child’s Income
Parents generally do not report their child’s earned income, such as W2 wages, on their own tax return. A child’s W2 wages are reported on the child’s individual tax return if filing requirements are met or if a refund is sought. This applies even if the child is claimed as a dependent on the parent’s tax return.
Parents can elect to include a child’s unearned income on their own return using IRS Form 8814, “Parents’ Election to Report Child’s Interest and Dividends.”
To use Form 8814 for the 2024 tax year, several conditions must be met: the child must be under age 19 (or under 24 if a full-time student) at the end of the year, and their only income must be from interest and dividends. Additionally, the child’s gross unearned income must be less than $13,000 for 2024, and they must not have made estimated tax payments or had federal income tax withheld. Form 8814 does not apply to a child’s earned income from a W2.
While using Form 8814 can simplify the filing process by avoiding a separate return for the child, it can sometimes lead to a higher overall tax bill for the family. This is because the child’s unearned income, after certain deductions, is taxed at the parent’s marginal tax rate, which is often higher than the child’s rate. For 2024, the first $1,300 of a child’s unearned income is tax-free, and the next $1,300 is taxed at the child’s rate, but amounts above $2,600 are subject to the parent’s rate under the “Kiddie Tax” rules. Therefore, parents should weigh the convenience against potential tax implications when considering this option for a child’s unearned income.