Do Minors Have to Pay Income Taxes?
Navigate the complexities of income tax for individuals under 18. Understand their filing obligations and how families manage these financial responsibilities.
Minors are subject to federal income tax laws, just like adults. Tax obligations depend on the amount and type of income received, not age. Specific rules address the unique financial situations of individuals under the age of majority, differentiating between income sources and establishing filing thresholds.
Taxability of Minor’s Income
A minor’s income is taxable, categorized by the IRS into two primary types: earned income and unearned income.
Earned income is money received from work or services, including wages, salaries, tips, and other employment compensation. This covers income from a part-time job or self-employment.
Unearned income comes from sources other than employment. This includes investment income like interest, dividends, and capital gains. It can also include rental income, trust distributions, or taxable scholarship grants.
Determining if a Minor Needs to File
A minor’s obligation to file a federal income tax return depends on the amount and type of income they receive. For the 2024 tax year, specific thresholds apply.
A minor must file if their earned income exceeds the standard deduction for a dependent ($14,600 for 2024). They must also file if their unearned income is more than $1,300 in 2024. If a minor has both earned and unearned income, they must file if their gross income exceeds the larger of $1,300 or their earned income plus $450.
Additionally, a minor must file if they owe any special taxes, such as self-employment tax. For 2024, if a minor has net earnings from self-employment of $400 or more, they are required to file. Even if a minor is not required to file based on these thresholds, it may still be beneficial to file a return to claim a refund of any income tax withheld from their paychecks.
Calculating a Minor’s Tax Liability
The method for calculating a minor’s tax liability varies depending on whether the income is earned or unearned.
Earned income for a minor is generally taxed at the minor’s own tax rate. The standard deduction for a dependent in 2024 is the greater of $1,300 or the sum of their earned income plus $450, up to a maximum of $14,600. This deduction reduces the amount of earned income subject to tax.
Unearned income, however, is subject to special rules known as the “Kiddie Tax.” This tax applies to a child’s unearned income exceeding certain thresholds. For 2024, the first $1,300 of a child’s unearned income is typically tax-free. The next $1,300 of unearned income is taxed at the child’s tax rate. Any unearned income above $2,600 is generally taxed at the parent’s marginal tax rate. This calculation is performed using Form 8615.
Filing Considerations for Parents and Minors
While a parent often assists in the tax preparation process, the minor is ultimately responsible for filing their own tax return and ensuring any taxes due are paid. If a minor is unable to sign their return, a parent or guardian must sign on their behalf.
Parents have an option to include a child’s unearned income on their own tax return under specific circumstances. This election is made using Form 8814. To qualify, the child’s only income must be from interest and dividends, their gross income must be below a certain limit (e.g., less than $13,000 for 2024), and they must meet age and dependency criteria. Electing this option can simplify filing by avoiding a separate return for the child, though it may result in a higher overall tax liability.
For minors required to file, the primary tax form is Form 1040. If the Kiddie Tax rules apply, Form 8615 will also be required. The responsibility for paying the tax rests with the minor, but parents often facilitate this payment.