The general rule is that you can claim a dependent child's investment income on your own return up to a certain amount —above that, they have to file themselves.
The definition of a dependent for tax purposes includes both qualifying children and qualifying relatives. Qualifying children must meet four criteria:. A qualifying relative, as opposed to a qualifying child, is defined as someone whom you support financially who lives with you in your residence whether related or not , or someone directly related to you whom you support. A relative you support does not have to live with you. In order to meet the relation definition, the relative must be a child who is not a qualifying child, a sibling including step and half , a direct ancestor, niece, nephew, aunt, or uncle, or their spouses.
These are the general criteria the Internal Revenue Service uses to determine who is a dependent, but particular credits and deductions have other rules. Income levels required to file a return for those 65 and over or blind are higher.
You do not include their earned income on your taxes. You can still claim them as a dependent on your return. A parent can elect to claim the child's unearned income on the parent's return if certain criteria are met. Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. She did not work during the year. She must file a tax return because she has unearned income only and her total income is more than the unearned income threshold for He does not have to file a tax return.
Even if your child does not meet any of the filing requirements discussed, he or she should file a tax return if 1 income tax was withheld from his or her income, or 2 he or she qualifies for the earned income credit, additional child tax credit , health coverage tax credit, refundable credit for prior year minimum tax, first-time home buyer credit, adoption credit, or refundable American opportunity education credit. See the tax return instructions to find out who qualifies for these credits.
By filing a return, your child can get a refund. The Tax Cuts and Jobs Act changed the rates for the kiddie taxes. During through all net unearned income was to be taxed using the brackets and rates for trusts and estates instead of parent's individual rates. This change proved so unpopular it was rescinded in and the old rules put back in place. Starting in , income tax on unearned income over the annual threshold must be paid at the parent's maximum tax income tax rate, not the rates for trusts and estates.
For and , parents have the option of using either their individual rates or the trust and estates rates. For details, see the article " The Kiddie Tax. For federal income tax purposes, the income a child receives for his or her personal services labor is the child's, even if, under state law, the parent is entitled to and receives that income. Some examples of unearned income include …. And other criteria apply as well.
Generally, single dependents must file a federal return if any of the following applies to their income:. In addition to filing for the purpose of claiming a refund, a dependent might opt to file to claim credits like the earned income credit.
You can find her on LinkedIn. Image: Young African-American boy, wearing a bowtie, and counting money from his lemonade stand, not worried about the possibility of having to file a dependent tax return. They may be required to file their own dependent tax return for any federal income tax they may owe.
If you report this income on your return, your child will not have to file their own tax return. All of the following conditions must be met before you can claim your child's interest and dividend income on your return:. Usually, backup withholding applies to most types of payments reported on Form These payments include:. Backup withholding generally does not apply to other payments reported on Form MISC other than royalty payments and payments by fishing boat operators unless at least one of the following three situations applies:.
In order to decide if your dependent should file a return on their own or with you, we recommend that you use our FILEucator tool to find out.
Finally, use the results from both tools as well as review the IRS tax return filing requirements to decide the best way to file based on your situation. Your dependent can prepare and e-file their tax return on eFile. We will determine the correct forms based on their answers to simple tax questions. We will then prepare their return and double-check for accuracy and missing information.
Before they start preparing their return your dependent will need copies of their W-2, MISC, or other tax forms from their employer. Get Your Tax Refund Date. What is DocuClix? Security About eFile. Where Is My Refund? How to Check Refund Status efile.
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