Do I Need to Report My Child’s 1099-INT on My Return?

When children receive investment income, particularly interest reported on a Form 1099-INT, specific tax rules apply. These regulations are designed to ensure income is appropriately taxed, sometimes requiring it to be reported on a parent’s tax return or triggering a filing requirement for the child. Understanding these provisions is important for complying with tax law and making informed decisions about how to manage a child’s income.

Determining a Child’s Filing Requirement

A child’s tax filing requirement depends on the type and amount of income they receive. Income is generally categorized as either “earned income,” such as wages from a job, or “unearned income,” which includes investment earnings like interest, dividends, and capital gains. A Form 1099-INT reports interest income, which falls under the unearned income category.

For the 2024 tax year, a dependent child must file a tax return if their unearned income exceeds $1,300. This threshold increases to $1,350 for the 2025 tax year. If a child has only earned income, the filing threshold is higher, set at $14,600 for 2024 and $15,000 for 2025. When a child has both earned and unearned income, the filing requirement is triggered if their gross income is greater than the larger of $1,300 (for 2024) or their earned income plus $450.

Even if a child’s income does not meet these filing thresholds, it may still be beneficial to file a tax return. If federal income tax was withheld from the child’s paychecks, or if they qualify for refundable tax credits, filing a return is the only way to claim a refund of any overpaid taxes. This can result in money being returned to the child that would otherwise be forfeited.

Understanding the Kiddie Tax

The Kiddie Tax is a specific set of rules designed to prevent high-income individuals from reducing their tax liability by shifting investment income to children, who might otherwise pay taxes at a lower rate. This provision applies to a child’s unearned income, ensuring it is taxed at the parent’s marginal tax rate once certain thresholds are exceeded.

Unearned income subject to the Kiddie Tax includes interest reported on a Form 1099-INT, ordinary dividends, qualified dividends, capital gains, and capital gain distributions. It also encompasses income from certain trusts, rents, royalties, and taxable scholarships. Income from wages, salaries, or self-employment is considered earned income and is not subject to the Kiddie Tax.

The Kiddie Tax applies to dependent children who are under age 19 at the end of the tax year. It also applies to full-time students aged 19 through 23 if their earned income does not exceed more than half of their support for the year. For the 2025 tax year, the first $1,350 of a child’s unearned income is tax-free, covered by the standard deduction for dependents. The next $1,350 is taxed at the child’s own tax rate. Any unearned income exceeding $2,700 for 2025 is then subject to the Kiddie Tax, meaning it is taxed at the parent’s marginal income tax rate. For the 2024 tax year, these thresholds were $1,300 (tax-free), $1,300 (child’s rate), and any amount above $2,600 (parent’s rate).

Parental Election to Report Child’s Income

Parents may have the option to include a child’s investment income on their own tax return, which can simplify the filing process by eliminating the need for the child to file a separate return. This election is made by attaching Form 8814, Parents’ Election To Report Child’s Interest and Dividends, to the parent’s Form 1040. A separate Form 8814 must be completed for each qualifying child.

To qualify for this election, several conditions must be met. The child must have been under age 19 at the end of the tax year, or under age 24 if a full-time student. Their only income must be from interest and dividends, including capital gain distributions, and their gross income must be less than $13,000 for the 2024 tax year or $13,500 for the 2025 tax year. Additionally, no estimated tax payments should have been made for the child, and no federal income tax should have been withheld from their income. The child also cannot file a joint tax return for the year.

When making this election, parents will need specific information from the child’s income forms, such as Form 1099-INT for interest income and Form 1099-DIV for dividends and capital gain distributions. While this election can streamline filing, it increases the parent’s adjusted gross income and potentially their overall tax liability.

Child’s Individual Tax Filing

If a child’s unearned income exceeds the Kiddie Tax thresholds, or if the parent does not meet the conditions to elect to report the child’s income on their own return, the child must file their own income tax return. This typically involves preparing Form 1040. When the Kiddie Tax applies, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child’s Form 1040.

Form 8615 is used to calculate the tax on the child’s unearned income that is subject to the parent’s tax rate. The form requires the child’s name and Social Security Number, as well as the parent’s name, Social Security Number, and filing status. The child’s total unearned income from sources like Form 1099-INT and Form 1099-DIV is reported on Form 8615. The form then guides the calculation, applying the child’s standard deduction for unearned income, taxing a portion at the child’s rate, and applying the parent’s marginal tax rate to the remaining unearned income.

Once Form 8615 is completed, the calculated tax amount is transferred to the child’s Form 1040. The child’s return can be filed electronically or by mail. Any taxes due can be paid directly to the IRS through various payment methods. Ensuring all necessary forms, including Form 8615, are properly attached to the child’s Form 1040 helps avoid processing delays.