Does My Child Need to File a Tax Return?

When a child earns income, parents often wonder if a tax return needs to be filed. The rules for dependent children can be complex and are determined by various factors, including the type and amount of income received. Understanding these specific requirements helps ensure compliance with tax regulations.

Determining Filing Requirements for Dependents

A dependent child’s obligation to file a federal income tax return hinges on their gross income, which includes both earned and unearned income. For the 2024 tax year, specific thresholds apply. Gross income encompasses all income received that is not exempt from tax.

If a dependent child has only earned income, such as wages, salaries, or tips from a job, they generally must file a tax return if their gross income exceeds $14,600. Earned income is compensation received for services performed, including self-employment earnings.

For dependent children with only unearned income, such as interest, dividends, capital gains, or distributions from a trust, a filing requirement arises if this income is more than $1,300 for the 2024 tax year. Unearned income typically comes from investments or other passive sources.

When a dependent child has both earned and unearned income, they must file a return if their gross income is greater than the larger of two amounts: $1,300, or their total earned income plus $450. This combined income threshold cannot exceed the standard deduction amount for a single filer, which is $14,600 for 2024.

Special Income Situations

Certain types of income have specific rules that can trigger a filing requirement for a dependent child at lower thresholds. One significant category is self-employment income, which includes earnings from activities like babysitting, lawn care, or online content creation. A dependent child must file a tax return if their net earnings from self-employment are $400 or more for the 2024 tax year.

Another consideration is the “Kiddie Tax,” which applies to a child’s unearned income exceeding a certain amount. For the 2024 tax year, the Kiddie Tax generally applies when a dependent child’s unearned income surpasses $2,600. Specifically, the first $1,300 of unearned income is tax-free, covered by the child’s standard deduction. The next $1,300 is taxed at the child’s own tax rate. Any unearned income above $2,600 is then taxed at the parent’s marginal tax rate, rather than the child’s typically lower rate.

The Kiddie Tax rules apply to children who are under age 18 at the end of the tax year, or age 18 if their earned income does not exceed half of their support. It also applies to full-time students aged 19 to 23 whose earned income does not exceed half of their support. Unearned income subject to these rules includes taxable interest, dividends, capital gains, rents, royalties, and certain taxable scholarships. Parents can sometimes elect to include their child’s interest and dividend income on their own tax return using Form 8814, provided the child’s unearned income consists only of interest and dividends and is below $11,000. If the child’s unearned income exceeds this amount or includes other types of unearned income, the child typically needs to file their own return and attach Form 8615.

Filing Even When Not Required

Even if a dependent child does not meet the income thresholds that mandate filing a tax return, there are beneficial reasons to do so. If federal income tax was withheld from the child’s paychecks, filing a return is necessary to claim a refund of any overpaid taxes.

A child may also qualify for certain tax credits, which can result in a refund even if no tax was withheld. For instance, if a child had earned income, they might be eligible for a portion of the Earned Income Tax Credit (EITC). Older dependents might qualify for education credits, such as the American Opportunity Tax Credit. Claiming these credits requires filing a tax return.

If a child made estimated tax payments during the year, filing a return is essential to reconcile those payments with the actual tax liability. This ensures proper accounting for any prepayments and determines if a refund is due or additional tax is owed.

Gathering Information for Tax Preparation

Preparing a tax return for a dependent child requires collecting specific financial and personal information. This typically includes Form W-2 for wages earned from an employer, Form 1099-INT for interest income from bank accounts, and Form 1099-DIV for dividends from investments. For children engaged in freelance work or gig economy activities, Form 1099-MISC or Form 1099-NEC might be issued to report non-employee compensation.

Beyond income documentation, essential personal details are required. This includes the child’s Social Security Number (SSN) and, if the child is a dependent, the parent’s SSN.

In situations where a child has self-employment income, records of any business expenses incurred are also important. For comprehensive guidance, IRS Publication 929, “Tax Rules for Children and Dependents,” serves as a valuable resource. Additionally, the IRS offers an Interactive Tax Assistant tool online, which can help determine specific filing requirements based on individual circumstances.