Q. My son received a $2000 scholarship prize from a private firm in 2024. Can this amount also be considered a hybrid between earned and unearned income?
A. No. It's more prize than scholarship. As such, it is unearned income for the standard deduction, filing threshold and kiddie tax. .
Q. $1432 is considered unearned income and subject to Kiddie Tax, right?
A. Yes. Actually the $1432 amount will increase slightly since the $2000 is unearned income. You don't get the full $14,600 standard deduction (SD). Your SD is earned income + $450.
Q. I'm a bit confused as to how the Kiddie Tax is applied to $1432?
A. It's convoluted. Follow the lines on form 8816 for the calculations. The $2600 rule will not apply, since your SD is more than $2600. The whole amount of your taxable income ($1432 on your first calculation) is subject to being taxed at the parent's highest tax rate.
