They are subject to the same tax rules as everyone else PLUS the "kiddie tax" rules so they could actually pay more depending on the type of income they have.
How do I report and pay the Kiddie Tax?
The Kiddie Tax is reported on your child's return (or yours, under specific conditions outlined below). However, including child income on your return not only increases your taxable income, it can reduce or eliminate deductions and credits that phase out at higher incomes.
For this reason, many people opt to file a separate return for their child. When you prepare your child's return, we'll ask you to enter info from one of the parents:
- For jointly-filing parents, enter the parent that appears first on the joint return.
- For separately-filing or unmarried parents, enter the parent with the highest taxable income.
- For divorced parents, enter the custodial parent.
When can I include my child's income on my return?
All these conditions must be met:
- Your child was under age 19 (24 if a full-time student) as of January 1, 2019;*
- Your child's income was solely from interest and dividends (including capital gains distributions and Alaska Permanent Fund dividends) and is less than $10,500;
- Your child is required to file (that is, their income exceeded $1,050);
- Your child is not filing a joint 2018 return;
- No 2018 estimated tax payments were made for your child (including 2017 overpayments applied to 2018 estimated tax)
- No federal taxes were withheld from your child's income; and
- You're either filing a joint return with your child's other parent or you're the parent who is qualified to include your child's income on your return (i.e., you're the custodial parent, or you and your spouse are filing separately and you have the higher taxable income).
To report your child's income on your return, simply follow these instructions and we'll apply the Kiddie Tax calculations.
*If your child was born on January 1, 2000, they are no longer considered "under 19" and therefore their income cannot be reported on your return. Same goes for full-time students born on January 1 of 1995, who are no longer considered "under 24."
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