With the TAX CUTS AND JOBS ACT, dependent children's unearned income filed in their names has no connection to the parents returns.
What I'm trying to understand is the difference between, say, a child with only $5000 of interest vs a child with only $5000 of qualified dividends.
The $5000 of interest only calculation I understand, though it's slightly complicated. The tax is $418.
1) Remove $1100 of standard deduction from the $5000 to get $3900 of taxable income.
2) Remove $2200 of net unearned income threshold from $5000 to get $2800 of net unearned income
3) The tax on the $2800 of the $3900 is $308 ( 10% of the first 2600 = 260 + 24% of the next 200 = $48)
4) The tax on the other $1100 of taxable income is a straight 10% or $110
5) $308 + $110 = $418. Exactly what turbotax computes.
Now the case of $5000 of qualified dividends mystifies me.
1) There is still $3900 of taxable income.
2) Turbotax computes $30 of tax.
3) The part I do understand. There is $2800 of unearned income. It gets taxed by the 2018 Trust and Estate Rates of $0 for the first $2600 and 15% of the rest, which is $200 = $30. There's my $30. OK.
4) The part I do not understand: why is the remaining $1100 not taxed anymore at 10% or $110? Giving a total tax of $140. TurboTax says, just the $30. How can that be? Is there a rule I'm ignorant of?
