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Understanding the IRS Kiddie Tax Rules

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 a child can’t get the required information about their parent’s tax return, the child (or the child’s legal representative) can request the necessary information from the IRS. This depends on form 8615 what kind of income your child has and how you want to report it. If children have any earned income and must file a return, they use Form 1040 like everyone else. From what I gather, we essentially have two options, neither of which allows us to treat the income as earned in a similar way that we would with a W-2.

  1. This specific question never appears in questions asked earlier in TurboTax and the answer (“Yes”) must be derived from other data that had been entered.
  2. Thus, the effect of this law change over these two periods is a wholesale repeal of the TCJA kiddie tax.
  3. In addition, kiddie tax applies whether or not you are a dependent of your parents.
  4. Your support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities.
  5. If the custodial parent and their 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.

The kiddie tax was first enacted as part of the Tax Reform Act of 1986 to prevent parents from putting assets into their children’s names and have the income derived from these assets potentially taxed at lower rates. An expense that most people commonly assume to be included in the qualified tuition and related expenses list is room and board, but it is not. Any scholarship or fellowship grant that is used to pay for room and board, or something else that is not considered qualified tuition or a related expense, is taxable. In addition, a scholarship may also be taxable when the scholarship is earmarked for a nonqualifying purpose such as room and board or travel.7 In these situations, the amount of the earmark is taxable. Applies to a taxpayer’s children who are under 18 or the child’s earned income is less than half their support and they are age 18 or a full-time student aged 19 – 23. The unearned income of the child is taxed at the parent’s rate if the parent’s rate is higher than the child’s rate.

For tax purposes, self-employment income includes any part-time businesses or “side work” performed in which you are in business for yourself, rather than another person. You are also considered self-employed if you engage in business-like activities where you intend to make a profit. The applicability of Form 8615 is heavily influenced by the child’s age. Different regulations apply to children below 18, those aged between 19 and 24 who are full-time students, and those above 18 but with earned income falling short of supporting more than half of their expenses. Navigating tax laws can be daunting, especially when it involves children and their unearned income.

How does this election affect the client’s tax benefits?

The amount entered on line 12a is $2,700, the total of the amounts on lines 5 and 7 ($900 + $1,800). The decimal on line 12b is 0.333, figured as follows and rounded to three places. Enter the amount from line 23 of this worksheet Schedule J on Form 8615, line 9, and check the box on that line. If you use the Qualified Dividends and Capital Gain Tax Worksheet to figure the line 9 tax, complete that worksheet as follows.


This is your child’s tax figured at the parent’s rate on net unearned income and the child’s tax rate on other income. When figuring the tentative tax at the parent’s tax rate on Form 8615, don’t refigure any of the exclusions, deductions, or credits on the parent’s return because of the child’s net unearned income. Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 that are directly connected with his unearned income. His adjusted gross income is $8,000, which is entered on Form 1040, line 11, and on Form 8615, line 1. Roger enters $2,500 on line 2 because that is more than the total of $1,250 plus his directly connected itemized deductions of $300 ($1,550).

If the amount was figured using the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or Schedule J, check the box on that line. Enter the amount from line 47 of this Schedule D Tax Worksheet on Form 8615, line 15, and check the box on that line. If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero.

To combat the widow’s tax, Gold Star spouses intentionally transferred DOD benefits to surviving children in order to collect all the benefits paid by the VA. Since these children were not earning these payments in exchange for their labor, the DOD benefits were unearned income for purposes of computing the kiddie tax and were taxed at rates as high as 37% under the TCJA kiddie tax. This was in stark contrast to the non-TCJA tax on these benefits that was imposed at the marginal tax rate of the Gold Star spouse. Thus, congressional efforts to simplify the kiddie tax via the TCJA led to these unintended consequences for Gold Star families. Unfavorable press coverage of these consequences motivated Congress to change the kiddie tax once again. Earned income and unearned income are defined the same across both calculations.

Community Locations Visited and Special Events or Occurrences — This field is required to identify the location(s) for off-site individualized skills and socialization and may be used to document special events or occurrences. If providing written documentation, enter the date on which the billable activity occurred and the staff initials. Name of Service Provider — The printed name of the service provider who provided the service event for on-site or off-site individualized skills and socialization.

The Role of Worksheets in Calculating Taxes

The services initialed must justify amount of time spent providing services. A minimum of one activity must be marked for a billable service claim to have occurred. A Form 1040 return with limited credits is one that’s filed using IRS Form 1040 only (with the exception of the specific covered situations described below). Use the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or the child’s actual Schedule J (Form 1040), whichever applies.

What is considered earned income?

We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will handle filing taxes for you. For filing Form 8615, the child’s valid Social Security Number (SSN) is a mandatory requirement, ensuring the accurate processing and association of tax records. Given the intricacies of the kiddie tax rules, seeking assistance from a tax professional or utilizing dependable tax software is often invaluable. Such resources can offer essential guidance, ensure adherence to tax laws, and potentially optimize tax outcomes. These rules also apply whether or not the child is a dependent.

Parents can never claim a child’s earned income or self-employment income and other types of income. It’s not necessary that you be claimed on someone else’s return for the form to be required. June, 2019 was the date that old archived posts were “migrated” form the old TurboTax “Answer Exchange” to this new “Community” forum, but migrated posts took on the date of migration as the posting date.

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Or, get unlimited help and advice from tax experts while you do your taxes with TurboTax Live Assisted. And if you want to file your own taxes, you can still feel confident you’ll do them right with TurboTax as we guide you step by step. No matter which way you file, we guarantee 100% accuracy and your maximum refund. If you use the Qualified Dividends and Capital Gain Tax Worksheet to figure the line 15 tax, complete that worksheet as follows. In the earlier example under Line 7, Sharon’s Form 8615 shows $1,800 on line 7.

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