Q. Only if the resulting taxable income is > $2,500 does kiddie tax kick in with taxable scholarship seen as unearned income?
A. No exactly. But, effectively yes.
Q. So in this case, the $316 results in no kiddie tax and $0 federal tax (and tiny state tax)?
A. No. The $316 is taxable on the federal return, but no kiddie tax.
$6,300 (earned income) + $2,000 (taxable scholarship/earned) + $716 (529 taxable earnings/unearned) = $9,016 total income – $8,700 ($8,300 + $400) = $316 child’s taxable income
