The program is wrong. I just spent hours researching an almost identical issue but using H&R Block software. H&R Block has the same problem as TT. The H&R Block software does have a Note that you may need to override line 9. In your example, since you were subject to kiddie tax in 2016, you are not entitled to $53,900 but instead $7,400 plus 2016 earned income. From IRS instructions: Line 9 - Don't enter more than the sum of your 2016 earned income plus $7,400 if you didn't file a joint return for 2016, at least one of your parents was alive at the end of 2016, and one of the following statements is true. 1. You were under age 18 at the end of 2016. 2. You were age 18 at the end of 2016 and didn't have earned income that was more than half of your support. 3. You were a full-time student at least age 19 but under age 24 at the end of 2016 and didn't have earned income that was more than half of your support.
