Do I Need to File a Tax Return for My Minor Child?

Parents often wonder whether their minor children need to file a tax return. While many minor children will not have a filing obligation, certain income levels or types can trigger this requirement. Understanding these conditions helps parents navigate the tax system for their dependents.

Determining if a Minor Child Needs to File a Tax Return

A minor child’s requirement to file a tax return depends on the type and amount of income they receive. The Internal Revenue Service (IRS) establishes specific thresholds for filing, differentiating between earned income (like wages) and unearned income (like interest and dividends).

For the 2024 tax year, a child must file if their unearned income was more than $1,300. If their earned income was more than $14,600, a filing requirement also exists. When a child has both earned and unearned income, they must file if their gross income exceeded the larger of $1,300, or their earned income up to $14,250 plus $450.

A child may also need to file a return in other situations. For instance, if federal income tax was withheld from their pay or if they made estimated tax payments, filing is necessary to claim a refund. If a child had net earnings from self-employment of $400 or more, they must file a tax return to report that income.

Understanding Your Child’s Taxable Income

Understanding a child’s income is important for determining tax obligations. Taxable income for a minor child is categorized into two main types: earned income and unearned income. Each category has different implications for filing requirements and tax treatment. Earned income refers to money received from working, such as wages, salaries, tips, professional fees, and income from self-employment activities like babysitting or lawn care.

Unearned income is money received without performing active work. This category includes interest from savings accounts or bonds, dividends from stocks, and capital gains from investment sales. Other examples include distributions from trusts, pension income, and taxable scholarship or fellowship grants.

For minor children with significant unearned income, a special rule known as the “Kiddie Tax” may apply. This rule aims to prevent parents from shifting investment income to their children to take advantage of lower tax rates. If a child’s unearned income exceeds a certain amount, a portion may be taxed at the parent’s marginal tax rate. For the 2024 tax year, the Kiddie Tax applies to unearned income over $2,600.

Reporting Your Child’s Income on a Tax Return

When a minor child’s income requires reporting, specific methods are available. The chosen method depends on the type and amount of the child’s income, as well as parental preference. The two primary approaches involve either including the child’s income on the parent’s tax return or filing a separate tax return for the child.

Parents may elect to include their child’s interest and dividend income on their own Form 1040, U.S. Individual Income Tax Return, under specific conditions. This option is available if the child’s only income is from interest and dividends, and the total amount is less than $13,000 for the 2024 tax year. To utilize this method, parents must file Form 8814, Parents’ Election To Report Child’s Interest and Dividends, with their own tax return.

Alternatively, a separate tax return must be filed for the child using Form 1040 if the conditions for including their income on the parent’s return are not met. This typically occurs when the child has earned income, income from sources other than just interest and dividends, or if their unearned income exceeds the threshold for parental election.

When the Kiddie Tax applies and the child is filing their own tax return, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child’s Form 1040. This form is used to calculate the tax on the child’s unearned income at the parent’s tax rate.