@Hal_Al
You've said taxable scholarships are a hybrid between earned income and unearned income. My question concerns when they flip from one to the other. My college student is applying for another taxable scholarship, which could kick their total earned income above the dependent/standard deduction. Is that the trigger? (And which is correct below?)
a) With no taxable income, no kiddie tax is due. (TT files Form 8615 to show that, right?)
$9,013 net earned income + $6,950 taxable scholarship (earned income) = $15,963 earned income + $187 unearned income (529 taxable earnings) = $16,150 total income – $16,413 (dependent deduction: $15,963 + $450) = – $263 taxable income (no taxable income)
b) But since $15,953 (or is it $16,150 or $16,413) is > $15,750 (2025 standard deduction), is the $6,950 taxable scholarship now considered unearned income? So, that’s $7,137 unearned income ($6,950 + $187), and the first $1,350 is not taxed, the next $1,350 is taxed at the dependent’s tax rate, and the last $2,700 at the parent’s marginal tax rate? (Or thereabouts?)
Thanks for your help.
