How to Report Your Child's Investment Income - John R. Dundon II, Enrolled Agent
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How to Report Your Child’s Investment Income

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How to Report Your Child’s Investment Income

If your minor child has been blessed with the opportunity to be endowed with income producing investments be wary as I have witnessed this can indeed become a curse for you on many levels. As if parenting isn’t hard enough it seems to only be complicated more so when children – particularly adolescents – are aware of and empowered by their tangible net worth.

This post is a brief review of IRS Publication 929, Tax Rules for Children and Dependents as well as an introduction to:

  • IRS Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900 and instructions
  • IRS Form 8814, Parent’s Election to Report Child’s Interest and Dividends

Applicable for 2011 investment income includes interest, dividends, capital gains and other unearned income. Your child’s tax on investment income must be figured using your tax rate if investment income for the tax year is greater than $1,900 and meets one of three age requirements:

  • Was under age 18 at the end of the year,
  • Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or
  • Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support.

To figure your child’s tax using your tax rate fill out Form 8615, and attach it to the child’s federal income tax return. When certain conditions are met, you may be able to avoid having to file a tax return for the child by including the child’s income on the their personal tax return. In this situation file file Form 8814, Parents’ Election To Report Child’s Interest and Dividends.