you can report the children's income on your return but only if the child's only income is from interest, dividends, and capital gain distributions. You are not required to use this method even if qualified.If securities were sold in their account, you can not use this method
The advantages of filing on parents' return:
- No need to file a separate return for the child, which might save some TurboTax fees
- Parents' income is increased, which may allow a larger investment interest deduction
- The parents' AGI-based limit on charitable contributions is increased
For most parents, only the first one is relevant
The disadvantages:
- Lost deductions for the child, such as any early withdrawal on savings penalty
- Greater net investment income. This could subject parents to NIIT or increase the tax
- Potentially a greater tax on the child's income. The first $1,350 of the child's taxable income MAY BE taxed at 10%, unless it consists of qualified dividends and/or capital gain distributions
