My 23 YO has $6500 in earned income reported on W2’s with no federal or state taxes withheld. She also has $8600 in unearned income on a 1099-g specified as a taxable grant. I am claiming her as a dependent. I’m baffled on how TT is calculating the tax on this scenario, more specifically for the earned income portion. I do understand that the unearned portion over $2300 is taxed at my rate which bumps up the tax for her significantly, but how is the earned portion taxed? Is the total of earned and unearned added together to determine the standard deduction? I would have thought that earned portion would be tax free since it’s under the standard deduction for single filers.
