Instructions for Form 8615 (2020)

Tax for Certain Children Who Have Unearned Income

Section references are to the Internal Revenue Code unless otherwise noted.

2020


Instructions for Form 8615 - Introductory Material

Future Developments

For the latest information about developments related to Form 8615 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form8615.

What’s New

Change in tax rates.

Recent legislation modified the tax rates and brackets used to figure the tax on 2020 unearned income for certain children. For tax year 2020, dependent children with unearned income above a certain amount are taxed at the parents' individual tax rate. Taxpayers may also elect to retroactively use the tax rates based on the parents’ individual tax rate for dependent children with unearned income in tax years 2018 and 2019.

Reminder

Election to modify the tax on your unearned income.

Recent legislation allows for taxpayers to elect to modify their tax on dependent children with unearned income for tax years 2018 and 2019. The election allows taxpayers to recalculate the tax on dependent children with unearned income for these years to be based on the parent’s individual tax rate instead of the previous tax rates (condensed trust and estates tax rates).

For tax years 2018 and 2019, if you choose to modify the tax on your unearned income using the tentative tax based on the tax rate of your parent, you will need to use the 2018 or 2019 Instructions for Form 8615 and file an amended return, Form 1040-X. See IRS.gov/Form1040X for more information about amending a tax return. If you make this election, include a statement or an attachment with your amended return specifying "election to modify tax on unearned income."

General Instructions

Purpose of Form

For children under age 18 and certain older children described below in Who Must File, unearned income over $2,200 is taxed at the parent's rate if the parent's rate is higher than the child's. If the child's unearned income is more than $2,200, use Form 8615 to figure the child's tax.

Unearned Income

For Form 8615, "unearned income" includes all taxable income other than earned income. Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.

Who Must File

Form 8615 must be filed for any child who meets all of the following conditions.

  1. The child had more than $2,200 of unearned income.

  2. The child is required to file a tax return.

  3. The child either:

    1. Was under age 18 at the end of 2020,

    2. Was age 18 at the end of 2020 and didn’t have earned income that was more than half of the child's support, or

    3. Was a full-time student at least age 19 and under age 24 at the end of 2020 and didn’t have earned income that was more than half of the child's support.

    (Earned income is defined later. Support is defined below.)

  4. At least one of the child's parents was alive at the end of 2020.

  5. The child doesn’t file a joint return for 2020.

For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent. These rules don’t apply if neither of the child’s parents were living at the end of the year.

Support.

Your support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your child’s support, count support provided by you, your child, and others. However, a scholarship received by your child isn’t considered support if your child is a full-time student. For details, see Pub. 501, Dependents, Standard Deduction, and Filing Information.

Certain January 1 birthdays.

Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under Who Must File.

IF you were born on... THEN, at the end of 2020, you are considered to be...
January 1, 2003 18*
January 1, 2002 19**
January 1, 1997 24***
*This child isn't under age 18. The child meets condition 3 only if the child didn't have earned income that was more than half of the child's support.
**This child meets condition 3 only if the child was a full-time student who didn't have earned income that was more than half of the child's support.
***Don’t use Form 8615 for this child.

.This is an Image: taxtip.gifThe parent may be able to elect to report the child’s interest, ordinary dividends, and capital gain distributions on the parent’s return. If the parent makes this election, the child won’t have to file a return or Form 8615. However, the federal income tax on the child’s income, including qualified dividends and capital gain distributions, may be higher if this election is made. For more details, see Form 8814, Parents’ Election To Report Child's Interest and Dividends..

Additional Information

For more details, see Pub. 929, Tax Rules for Children and Dependents.

Incomplete Information for Filing

If the parent's taxable income, filing status, or net unearned income of the parent's other children isn't known by the due date of the child’s return, reasonable estimates can be used. Enter "Estimated" next to the appropriate line(s) of Form 8615. When the correct information is available, file Form 1040-X, Amended U.S. Individual Income Tax Return.

Instead of using estimates, the child can get an automatic 6-month extension of time to file. For details, see Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

.This is an Image: caution.gifAn extension of time to file isn’t an extension of time to pay..

Amended Return

If the parent’s income changes after the child’s return is filed, the tax must be refigured using the adjusted amounts. The child's tax must also be refigured if there are changes to the net unearned income of other children for whom the parent is required to file a Form 8615. If the child's tax changes, file Form 1040-X to correct the child's tax.

Alternative Minimum Tax

A child whose tax is figured on Form 8615 may owe the alternative minimum tax. For details, see Form 6251, Alternative Minimum Tax—Individuals, and its instructions.

Net Investment Income Tax

A child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). NIIT is a 3.8% tax on the lesser of net investment income or the excess of the child’s modified adjusted gross income (MAGI) over the threshold amount. UseForm 8960, Net Investment Income Tax, to figure this tax. For more information on NIIT, go to IRS.gov/NIIT.

Specific Instructions

Lines A and B

If the child’s parents were married to each other and filed a joint return, enter the name and social security number (SSN) of the parent who is listed first on the joint return.

If the parents were married but filed separate returns, enter the name and SSN of the parent who had the higher taxable income. If you don’t know which parent had the higher taxable income, see Pub. 929.

If the parents were unmarried, treated as unmarried for federal income tax purposes, or separated by either a divorce or separate maintenance decree, enter the name and SSN of the parent with whom the child resided for the greater part of the calendar year. See the definition of custodial parent in Pub. 501.

Exceptions.

If the custodial parent remarried and filed a joint return with his or her new spouse, enter the name and SSN of the person listed first on the joint return, even if that person isn’t the child’s parent. If the custodial parent and his or her new spouse filed separate returns, enter the name and SSN of the person with the higher taxable income, even if that person isn’t the child’s parent.

If the parents were unmarried but lived together during the year with the child, enter the name and SSN of the parent who had the higher taxable income.

Line 1

If the child had no earned income (defined below), enter the child’s adjusted gross income from Form 1040 or 1040-NR, line 11.

If the child had earned income, use the Child's Unearned Income Worksheet, later, to figure the amount to enter on line 1. But use Pub. 929 instead of the worksheet to figure the amount to enter on line 1 if the child:

  • Files Form 2555 (relating to foreign earned income),

  • Has a net loss from self-employment, or

  • Claims a net operating loss deduction.

Earned income.

Earned income includes wages, tips, and other payments received for personal services performed.

If the child is a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of the child’s share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). However, the 30% limit doesn’t apply if there are no net profits from the trade or business.

If capital isn’t an income-producing factor and the child’s personal services produced the business income, all of the child’s gross income from the trade or business is considered earned income. In that case, earned income is generally the total of the amounts reported on Form 1040, line 1; Schedule 1 (Form 1040), lines 3 and 6; or Form 1040-NR, line 1a.

Earned income also includes any taxable distribution from a qualified disability trust. A qualified disability trust is any nongrantor trust:

  1. Described in 42 U.S.C. 1396p(c)(2)(B)(iv) and established solely for the benefit of an individual under 65 years of age who is disabled, and

  2. All the beneficiaries of which are determined by the Commissioner of Social Security to have been disabled for some part of the tax year within the meaning of 42 U.S.C. 1382c(a)(3).

A trust won’t fail to meet (2) above just because the trust’s corpus may revert to a person who isn’t disabled after the trust ceases to have any disabled beneficiaries.

Child’s Unearned Income Worksheet—Line 1

1. Enter the amount from the child’s Form 1040 or 1040-NR, line 9, whichever applies _____
2. Enter the child’s earned income (defined earlier) plus the amount of any penalty on early withdrawal of savings from the child’s Schedule 1 (Form 1040), line 17, whichever applies _____
3. Subtract line 2 from line 1. Enter the result here and on Form 8615, line 1 _____

Line 2

If the child itemized deductions, enter the larger of:

  • $2,200; or

  • $1,100 plus the portion of the amount on Schedule A (Form 1040), line 17 (or Schedule A (Form 1040-NR), line 8), that is directly connected with the production of the unearned income on Form 8615, line 1.

Line 4

If the child files Form 2555 (relating to foreign earned income), enter the amount from line 3 of the child's Foreign Earned Income Tax Worksheet (in the Instructions for Forms 1040 and 1040-SR), instead of the child's taxable income.

Line 6

If the parent filed a joint return, enter the taxable income shown on that return even if the parent's spouse isn’t the child's parent.

If the Foreign Earned Income Tax Worksheet (in the Instructions for Forms 1040 and 1040-SR) was used to figure the parent's tax, enter the amount from line 3 of that worksheet, instead of the parent's taxable income.

Line 8

Enter on this line the total of lines 5, 6, and 7. You must determine the amount of net capital gain and qualified dividends included on this line before completing line 9.

Net capital gain.

Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. If Schedule D isn’t required, it is the amount on Form 1040 or 1040-NR, line 7.

Qualified dividends.

Qualified dividends are those dividends reported on line 3a of Form 1040 or 1040-NR.

Net capital gain and qualified dividends on line 8.

If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. (The term “other child” means any other child whose Form 8615 uses the tax return information of the parent identified on Lines A and B of Form 8615.)

If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero.

If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7.

If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Use the following discussions to find these amounts.

Net capital gain or qualified dividends on line 5.

If the child has a net capital gain or qualified dividends, use the appropriate Line 5 Worksheet in these instructions to find the amount included on line 5. These worksheets are needed to adjust the child's net capital gain and qualified dividends by the appropriate allocated amount of the child's deductions.

Net capital gain or qualified dividends on line 6.

If the parent has a net capital gain, its full amount is the net capital gain included on line 6. If the parent has qualified dividends, the full amount is the amount of qualified dividends included on line 6.

Net capital gain or qualified dividends on line 7.

The net capital gain included on line 7 is the total of the amounts of net capital gain included on line 5 of the other children's Forms 8615. The qualified dividends included on line 7 is the total of the amounts of qualified dividends included on line 5 of the other children's Forms 8615. Find these amounts for each other child as explained under Net capital gain or qualified dividends on line 5 discussed earlier. (Don’t attach the other children's Forms 8615 to this child's return.)

2020 Line 5 Worksheet #1

Use this worksheet only if line 2 of the child's Form 8615 is $2,200 and lines 3 and 5 are the same amount.

1. Enter the child's qualified dividends 1. _____
2. Enter the child's net capital gain 2. _____
3. Enter the amount from the child's Form 8615, line 1 3. _____
4. Divide line 1 by line 3. Enter the result as a decimal (rounded to at least three places). Don’t enter more than 1.000 4. _____
5. Divide line 2 by line 3. Enter the result as a decimal (rounded to at least three places). Don’t enter more than 1.000 5. _____
6. Multiply $2,200 by line 4 6. _____
7. Multiply $2,200 by line 5 7. _____
8. Qualified dividends on Form 8615, line 5. Subtract line 6 of this worksheet from line 1 (but don’t enter less than zero or more than the amount on Form 8615, line 5) 8. _____
9. Net capital gain on Form 8615, line 5. Subtract line 7 of this worksheet from line 2 (but don’t enter less than zero or more than the excess of Form 8615, line 5, over line 8 of this worksheet) 9. _____

2020 Line 5 Worksheet #2

Use this worksheet only if line 2 of the child's Form 8615 is more than $2,200 and lines 3 and 5 of the child's Form 8615 are the same amount.

1. Enter the child's qualified dividends 1. _____
2. Enter the child's net capital gain 2. _____
3. Add lines 1 and 2 3. _____
4. Divide line 1 by line 3. Enter the result as a decimal (rounded to at least three places) 4. _____
5. Enter the child's itemized deductions directly connected with the production of the child's qualified dividends or net capital gain 5. _____
6. Multiply line 4 by line 5 6. _____
7. Subtract line 6 from line 5 7. _____
8. Subtract line 7 from line 2 8. _____
9. Subtract line 6 from line 1 9. _____
10. Enter the amount from the child's Form 8615, line 1 10. _____
11. Divide line 1 by line 10. Enter the result as a decimal (rounded to at least three places). Don’t enter more than 1.000 11. _____
12. Divide line 2 by line 10. Enter the result as a decimal (rounded to at least three places). Don’t enter more than 1.000 minus the amount on line 11 12. _____
13. Multiply $1,100 by line 11 13. _____
14. Multiply $1,100 by line 12 14. _____
15. Qualified dividends on Form 8615, line 5. Subtract line 13 from line 9 (but don’t enter less than zero or more than the amount on Form 8615, line 5) 15. _____
16. Net capital gain on Form 8615, line 5. Subtract line 14 from line 8 (but don’t enter less than zero or more than the excess of Form 8615, line 5, over line 15 of this worksheet) 16. _____

2020 Line 5 Worksheet #3

Use this worksheet only if the child's Form 8615, line 5, is less than line 3.

1. Enter the child's qualified dividends 1. _____
2. Enter the child's net capital gain 2. _____
3. Add lines 1 and 2 3. _____
4. Divide line 1 by line 3. Enter the result as a decimal (rounded to at least three places) 4. _____
5. If the child itemized deductions, enter the child's itemized deductions directly connected with the production of the income on line 3 5. _____
6. Multiply line 4 by line 5 6. _____
7. Subtract line 6 from line 5 7. _____
8. Subtract line 7 from line 2 8. _____
9. Subtract line 6 from line 1 9. _____
10. Enter -0- 10. _____
11. If the child itemized deductions, enter the child's itemized deductions not directly connected with the production of the income shown on line 3 of this worksheet. Otherwise, enter the child's standard deduction 11. _____
12. Add lines 10 and 11 12. _____
13. Enter the child's adjusted gross income (Form 1040 or 1040-NR, line 11) 13. _____
14. Divide line 3 by line 13. Enter the result as a decimal (rounded to at least three places). Don’t enter more than 1.000 14. _____
15. Multiply line 12 by line 14 15. _____
16. Multiply line 15 by line 4 16. _____
17. Subtract line 16 from line 15 17. _____
18. Qualified dividends on Form 8615, line 5. Subtract line 16 of this worksheet from line 9. Enter the result here (but don’t enter less than zero or more than the amount on Form 8615, line 5) 18. _____
19. Net capital gain on Form 8615, line 5. Subtract line 17 of this worksheet from line 8 (but don’t enter less than zero or more than the excess of Form 8615, line 5, over line 18 of this worksheet) 19. _____

Line 9

Figure the tax using the Tax Table, Tax Computation Worksheet, Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule J (Form 1040), whichever applies.

If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040-NR instructions to figure the tax, unless you have to use the Schedule D Tax Worksheet or Schedule J (see below).

Schedule D Tax Worksheet.

If the child, parent, or any other child has to file Schedule D and line 18 or 19 of any Schedule D is more than zero, use the Schedule D Tax Worksheet in the Instructions for Schedule D to figure the tax. See Pub. 929 for details on how to figure the line 9 tax using the Schedule D Tax Worksheet.

Schedule J (Form 1040).

If any farming or fishing income (including certain amounts received in connection with the Exxon Valdez litigation) is included on line 8, the tax may be less if you use Schedule J. If Schedule J was used to figure the tax on the parent's return, see Pub. 929 for details on how to figure the tax.

Child files Form 2555.

If line 8 includes any net capital gain or qualified dividends and the child or any other child filing Form 8615 also files Form 2555, see Pub. 929 for instructions on how to figure the line 9 tax.

Using the Qualified Dividends and Capital Gain Tax Worksheet for line 9 tax.

If you use the Qualified Dividends and Capital Gain Tax Worksheet to figure the line 9 tax, complete that worksheet as follows.

  1. On line 1, enter the amount from Form 8615, line 8.

  2. On line 2, enter the amount of qualified dividends included on Form 8615, line 8. (See the instructions for line 8.)

  3. On line 3, enter the amount of the net capital gain included on Form 8615, line 8. (See the instructions for line 8.)

  4. Complete line 4 following the worksheet instructions.

  5. If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax, go to step 7 below. Otherwise, skip steps 7, 8, and 9 of these instructions below, and go to step 10.

  6. Determine whether there is a line 8 capital gain excess. To do this, subtract from line 1 of the worksheet the amount on line 2c of the parent's Foreign Earned Income Tax Worksheet. If the result is more than zero, that amount is the line 8 capital gain excess. If the result is zero or less, there is no line 8 capital gain excess.

  7. If there is no line 8 capital gain excess, skip step 9 below and go to step 10.

  8. If there is a line 8 capital gain excess, complete a second Qualified Dividends and Capital Gain Tax Worksheet, as instructed, earlier, and in step 10, later, but in its entirety and with the following additional modifications.

    1. Reduce the amount you would otherwise enter on line 3 (but not below zero) by the line 8 capital gain excess.

    2. Reduce the amount you would otherwise enter on line 2 (but not below zero) by any of the line 8 capital gain excess not used in (a) earlier.

  9. Complete lines 5 through 25 following the worksheet instructions. Use the parent's filing status to complete lines 6, 13, 23, and 24.

Enter the amount from line 25 of the Qualified Dividends and Capital Gain Tax Worksheet on Form 8615, line 9, and check the box on that line. Don’t attach this worksheet to the child's return.

Line 10

If the parent filed a joint return, enter the tax shown on that return even if the parent's spouse isn’t the child's parent.

If the Foreign Earned Income Tax Worksheet (in the Instructions for Forms 1040 and 1040-SR) was used to figure the parent's tax, enter the amount from line 4 of that worksheet, instead of the parent's tax from Form 1040, line 16.

Line 15

Figure the tax using the Tax Table, Tax Computation Worksheet, Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule J, whichever applies.

.This is an Image: taxtip.gifIf line 14 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. However, if the child has to file Schedule D and line 18 or line 19 of the child's Schedule D is more than zero, use the Schedule D Tax Worksheet to figure this tax instead. See Pub. 929 for details on how to figure the line 15 tax using the Schedule D Tax Worksheet..

.This is an Image: taxtip.gifBefore using the Qualified Dividends and Capital Gain Tax Worksheet to figure the line 15 tax, you will need to know the amount of net capital gain and qualified dividends, if any, included on line 14..

Net capital gain and qualified dividends on line 14.

If the child doesn’t have any net capital gain or qualified dividends, line 14 doesn’t include any net capital gain or qualified dividends. If the child has net capital gain, the amount of net capital gain included on line 14 is the amount from line 2 of the child's completed Line 5 Worksheet minus the amount from the last line of that worksheet. If the child has qualified dividends, the amount of qualified dividends included on line 14 is the amount from line 1 of the child's completed Line 5 Worksheet minus the amount from the next to the last line of that worksheet.

Child files Form 2555.

If line 14 includes any net capital gain or qualified dividends and the child files Form 2555, see Pub. 929 for instructions on how to figure the line 15 tax.

Using the Qualified Dividends and Capital Gain Tax Worksheet for line 15 tax.

If you use the Qualified Dividends and Capital Gain Tax Worksheet to figure the line 15 tax, complete that worksheet as follows.

  1. On line 1, enter the amount from Form 8615, line 14.

  2. On line 2, enter the amount of the qualified dividends included on Form 8615, line 14. (See Net capital gain and qualified dividends on line 14, earlier.)

  3. On line 3, enter the amount of the net capital gain included on Form 8615, line 14. (See Net capital gain and qualified dividends on line 14, earlier.)

  4. Complete line 4 following the worksheet instructions.

  5. If you are completing the worksheet in the Instructions for Forms 1040 and 1040-SR, leave line 5 blank.

  6. Complete lines 5 through 25 following the worksheet instructions. Use the child's filing status to complete lines 6, 13, 23, and 24 of the worksheet for Form 1040.

Enter the amount from line 25 of this Qualified Dividends and Capital Gain Tax Worksheet on line 15 of Form 8615 and check the box on that line. Don’t attach this worksheet to the child's return.

Using Schedule J (Form 1040) for line 15 tax.

If line 14 includes any farming or fishing income (including certain amounts received in connection with the Exxon Valdez litigation), the tax may be less if you use Schedule J. See Pub. 929 for details on how to figure the line 15 tax using Schedule J.

Line 17

Figure the tax using the Tax Table, Tax Computation Worksheet, Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule J, whichever applies.

If line 4 includes any qualified dividends or net capital gain, use the Qualified Dividends and Capital Gain Tax Worksheet to figure the tax unless the Schedule D Tax Worksheet has to be used instead.

If any farming or fishing income (including certain amounts received in connection with the Exxon Valdez litigation) is included on line 4, the tax may be less if you use Schedule J.

Child files Form 2555.

If line 4 includes any qualified dividends or net capital gain and the child files Form 2555, see Pub. 929 for instructions on how to figure the line 17 tax.

Line 18

If the child files Form 2555, don’t enter the amount from Form 8615, line 18, on the child's Form 1040, line 16. Instead, enter the amount from Form 8615, line 18, on line 4 of the child's Foreign Earned Income Tax Worksheet (in the Instructions for Forms 1040 and 1040-SR). Then complete the rest of the Foreign Earned Income Tax Worksheet to figure the child's tax.