Does Dependent Need to File Tax Return

[cococasper]

2021 1098-T Box 1 $7670.65, Box 5 $9646.55 and Books $490.03.

$9647 – $7671= $1976

$1976 - $490 = $1486.

Mary did not have unearned income, nor did she work in 2021.

2021 1040 Instructions Chart B —For Children and Other Dependents.  The chart is used to determine if a dependent must file a return.  Taxable scholarship and grants fall under earned income.

Does Mary need to file a tax return base on $1486 earned income?

[Hal_Al · Accepted solution]

Q. Does Mary need to file a tax return based on $1486 earned income?

A. No.

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2021 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,550 (2021).
2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1100.
3.          Unearned income over $350 and gross income of more than $1100
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

[cococasper]

Mary is the dependent under 24 that was a full-time student during 2021 that had $1486 left over of grant money for 2021. 

She did not work, nor did she have unearned income.

So, she does not need to file a tax return.  Is that correct?

[Hal_Al]

Question: Mary is the dependent under 24 that was a full-time student during 2021 that had $1486 left over of grant money for 2021. She did not work, nor did she have unearned income. So, she does not need to file a tax return.  Is that correct?

Answer: Yes, that is correct.

Q. Why the confusion?

A.  Scholarship is a "hybrid'' income source.  It is both earned and unearned income. It is earned income for the $12,550 filing requirement, and for calculating a dependent's standard deduction (earned income +$350, but not more than $12,550).  It is unearned income for purposes of the kiddie tax and qualifying for the EITC.