@1420tigre wrote:
Also, TurboTax is saying they only get a $1,100 deduction
Yes, that's the "kiddie tax." The point of the kiddie tax is to prevent parents from hiding investment income by putting it in the name of their kids who get a lower tax rate. It applies to all "unearned income" which includes investment income but unfortunately also includes unemployment insurance. You can read about it more here. https://www.irs.gov/taxtopics/tc553
https://www.irs.gov/pub/irs-pdf/i8615.pdf
https://www.irs.gov/publications/p929
The kiddie tax only applies if the child is under age 19 and did not provide their own support, or under 24 and also a full time student. I would be surprised if $18K of income does not constitute more than half their own support, which would cause them to not be claimable as a dependent. I'm also surprised that an 18 year old, or a college student, would qualify for $18K of unemployment compensation, that's a lot of generosity from the state.
If you can't honestly state that the child provided more than half their own support, then they have to pay the tax, and $12K of unemployment (net after taxes) is still way more money than I made when I was a teen.
