UTMA Capital Gains Taxes for Dependent not showing federal tax due

EricLor · ‎February 22, 2021

My 3 year old child has a UTMA in his name I manage that has generated capital gains and it is not showing any federal tax due on his own tax filing even if I enter a large capital gain (like $10,000 in gains). The state tax updates properly. It only starts showing federal tax if I enter he has a long term capital gain of over $45,000! I know this isn't correct given Kiddie Tax laws/rates.

When I started his filing I answered that he is being claimed as a dependent and I saw where he was only supposed to get a small standard deduction because of that. I suspect it assume I'm claiming his income on my own tax filing, but I can't find where to set that and it never asked me if I was. I would like his taxes to be on his own because his actual tax should be fairly low.

Mike9241 · ‎February 22, 2021

when a child has security sales the parent(s) can no longer report the child's income on their return. if the child's gross capital gains and other unearned income are more than $1100 (gains and losses can't be netted) then they have to file a return and include form 8615

now the goofy thing is that while a return for the child may be required based on the above criteria, there is no kiddie tax unless their unearned income is over $2200 - that's net capital gains, dividends and interest. if it is over $2200 then the parent(s) have to prepare their return because the kiddies tax is in effect and it's based in part on the parent(s) taxable income and tax.

https://www.irs.gov/pub/irs-pdf/f8615.pdf

EricLor · ‎February 23, 2021

Ok, so have to file it in child's name which was my plan. I still don't understand why turbo tax isn't reporting federal tax due unless I put in at least $45,000 gains.

I'll look at 8615, odd Turbo Tax didn't prompt me on that.

UTMA Capital Gains Taxes for Dependent not showing federal tax due

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