Q. She earned around $5000 last year so with the addition of the $4000 from the scholarship she shouldn't need to file. Is that correct?
A. Yes. More accurately, she is not required to file, because her total income is under the $14,600 filing requirement. You may want to have her file just to document the reporting of the scholarship as income.
Q. But would the kiddie tax still apply to that 'unearned ' $4000?
A. No. It never makes it to the kiddie tax form, because her standard deduction ($5000 + 4000 + 450 = 9550) wipes it all out. Or another way to say it: the "hybrid earned income" never transitions from earned to unearned income because it's less than $14,600.
