Assuming you have no earned income (wages), the interest is taxed in three distinct tiers:
Tier 1: Tax-Free Portion ($0 – $1,350)
The first $1,350 is covered by the dependent's stan...
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Assuming you have no earned income (wages), the interest is taxed in three distinct tiers:
Tier 1: Tax-Free Portion ($0 – $1,350)
The first $1,350 is covered by the dependent's standard deduction for unearned income.
Tax: $0
Tier 2: Child’s Tax Rate ($1,350 – $2,700)
The next $1,350 is taxed at the child's individual marginal tax rate, which is typically 10%.
Tax: ~$135
Tier 3: Parents’ Tax Rate ($2,700 – $15,000)
The remaining $12,300 is taxed at the parents' highest marginal tax rate.
For example, if the parents are in the 24% tax bracket, this portion would incur approximately $2,952 in tax
In this example, total tax would be $3,087. If your form 8615 is not computing appropriately, you could Delete it and step through your 1099-INT entry again. Be sure you indicated you are being claimed as a Dependent in the Personal Info section. Here's more info on Form 8615.
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