You have a choice. If your child is required to file, you can file for them or because this is a special case, include the interest on your return.
The rules are different when your child receives income from sources other than employment, such as interest and dividend payments. When the 2020 total of this type of income exceeds $1,100, then a return must be filed for your child.
If your child’s unearned income only consists of interest and dividends, then you can elect to include it on your own return and combine it with your income. Do this by completing IRS Form 8814 and attaching it to your personal tax return (TurboTax will do this for you).
However, depending on the level of your income, making this election may result in higher income tax than if you prepare a separate return for your child. This is because it could push you into a higher tax bracket, where higher tax rates may apply. If you decide to prepare a separate return for your child, the same reduced standard deduction rules detailed above will apply.
