Does My Child Have to File a Tax Return?

Understanding the specific tax rules for minors is important, as income earned by children can have tax implications for both the child and the parents. The necessity of filing a return hinges on factors like the amount and type of income a child receives during the tax year.

Determining Filing Requirements

Whether a child needs to file a tax return depends on their gross income, which includes both earned and unearned income, and how that income compares to specific thresholds. For the 2024 tax year, a dependent child must file a return if their unearned income exceeded $1,300. If they only had earned income, a return is required if their earned income was more than $14,600. When a dependent child has both earned and unearned income, they must file a return if their gross income was more than the larger of $1,300, or their earned income up to $14,250 plus $450.

The standard deduction for dependents plays a significant role in determining these filing thresholds. For 2024, a dependent’s standard deduction is limited to the greater of $1,300 or their earned income plus $450. This amount cannot exceed the basic standard deduction for a single filer, which is $14,600 for 2024. Therefore, if a child’s total income is less than their applicable standard deduction, they may not need to file a return.

Even if a child’s income falls below these filing thresholds, filing a tax return can sometimes be beneficial. For instance, if federal income tax was withheld from the child’s paychecks, filing a return is the only way to receive a refund of that overpayment. Similarly, if the child had net earnings from self-employment of $400 or more, they are required to file a return to report and pay self-employment taxes, regardless of their total gross income. They may also need to file to claim refundable tax credits, such as the Earned Income Tax Credit (EITC).

Understanding Your Child’s Income

Distinguishing between earned and unearned income is important when assessing a child’s tax obligations. Earned income encompasses money received from work or services performed. This includes wages, salaries, tips, and income from self-employment activities. For example, earnings from a part-time job, babysitting, or lawn mowing are considered earned income.

Unearned income, conversely, refers to income derived from investments or other sources where no labor was performed. Common examples include taxable interest from savings accounts, dividends from stocks, and capital gains from the sale of assets like mutual funds or real estate. This category also includes distributions from trusts, rents, and royalties.

The distinction between these two income types is important because different tax rules and filing thresholds apply to each. Unearned income is subject to stricter filing requirements and can trigger special tax calculations, such as the Kiddie Tax, at much lower amounts than earned income. Accurately categorizing income is necessary to determine filing obligations and how it will be taxed.

Key Tax Forms and Rules

When a child’s income necessitates filing a tax return, the primary form used is Form 1040, the U.S. Individual Income Tax Return. This form is used to report all types of income, claim deductions, and calculate the overall tax liability. Depending on the income, additional schedules may be attached to Form 1040, such as Schedule 1 for unemployment compensation or capital gains.

A key rule for children with unearned income is the “Kiddie Tax,” which prevents parents from shifting investment income to children for lower tax rates. The Kiddie Tax applies to unearned income exceeding certain thresholds. 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. Unearned income above $2,600 is taxed at the parent’s marginal tax rate, which is higher than the child’s rate.

The Kiddie Tax calculation is performed on Form 8615, “Tax for Certain Children Who Have Unearned Income.” This form must be attached to the child’s Form 1040 if the child has more than $2,600 in unearned income and meets specific age and parental criteria. The rules apply to children under age 18, or 18-year-olds whose earned income is not more than half of their support, or full-time students aged 19 to 23 whose earned income is not more than half of their support.

Filing for Your Child

Filing a tax return for a child involves several steps. A key requirement is that the child must have a Social Security Number (SSN) for IRS identification. This unique identifier is necessary for all tax reporting purposes, including the issuance of income statements like W-2s or 1099s.

The parent or legal guardian is responsible for preparing and signing the tax return on behalf of the minor child. When signing, the parent should write the child’s name, followed by “by” and their own signature, along with their relationship to the child (e.g., “parent” or “guardian”). This indicates that the adult is signing in a representative capacity. Even when a child files their own return, parents can still claim the child as a dependent on their own tax return if all dependency tests are met, such as age, residency, and support.

Tax returns for children can be submitted electronically through e-filing services or by mailing a paper return to the IRS. E-filing is often preferred for its speed and accuracy, and many tax software programs support the preparation of returns for dependents. Regardless of the submission method, ensuring all necessary forms, like Form 1040 and potentially Form 8615, are completed accurately and submitted by the tax deadline is important to avoid penalties or delays.