The following two situations may affect the tax and reporting of the unearned income of certain children.
- If your child's interest, dividends, and other unearned income total more than $2,200, it may be subject to tax. The unearned income of certain children is taxed using the tax brackets and rates for estates and trusts unless an election is made to calculate the child's tax based on the parent's tax rate. See the Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income (PDF) for more information.
- If your child's only income is interest and dividend income (including capital gain distributions) and totals less than $11,000, you may be able to elect to include that income on your return rather than file a return for your child. See Form 8814, Parents' Election To Report Child's Interest and Dividends (PDF).
For either situation above to apply, your child must be required to file a return. For filing requirement information, see Publication 929, Tax Rules for Children and Dependents and Do I Need to File a Tax Return?
Tax for Certain Children Who Have Unearned Income
Use Form 8615, Tax for Certain Children Who Have Unearned Income (PDF) to figure your tax on unearned income over $2,200 if you're under age 18, and in certain situations if you're older (see below). Attach Form 8615 to your tax return if all of the following conditions are met.
- Your unearned income was more than $2,200.
- You meet one of the following age requirements:
- a. You were under age 18 at the end of the tax year,
- b. You were age 18 at the end of the tax year and you didn't have earned income that was more than half of your support, or
- c. You were a full-time student at least age 19 and under age 24 at the end of the tax year and you didn't have earned income that was more than half of your support.
- At least one of your parents was alive at the end of the tax year.
- You're required to file a tax return for the tax year.
- You don't file a joint return for the tax year.
If you're required to file Form 8615, you 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 your modified adjusted gross income (MAGI) over a threshold amount. Use Form 8960, Net Investment Income Tax (PDF) to figure this tax. For more information, see Topic No. 559 and Questions and Answers on the Net Investment Income Tax.
Parents' Election to Report Child's Interest and Dividends
You may be able to elect to report your child's interest, ordinary dividends, and capital gains distributions on your return. If you make this election, your child won't have to file a tax return. To make this election, attach Form 8814, Parents' Election To Report Child's Interest and Dividends (PDF) to your Form 1040 (PDF), Form 1040-SR (PDF) or Form 1040-NR (PDF) if your child meets all of the following conditions.
- At the end of the tax year your child was under age 19 (or under age 24 if a full-time student).
- Your child's gross income was less than $11,000 for the tax year.
- Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).
- No estimated tax payments were made for your child for the tax year, and no overpayment from the previous tax year (or from any amended return) was applied to the current tax year under your child's name and social security number.
- No federal income tax was withheld from your child's income under the backup withholding rules.
- Your child is required to file a return unless you make this election.
- Your child doesn't file a joint return for the tax year.
- You're the parent qualified to make the election or you file a joint return with your child's other parent.
Refer to Publication 929, Tax Rules for Children and Dependents for more information, definitions, considerations, and the following issues:
- Certain January 1 birthdays,
- Parents who don't file a joint return,
- A child with capital gain distributions, and
- Other effects of the election on the parents' return.