How to calculate virginia kiddie tax

[sharon-ruan]

For 2017, the kiddie tax limits allow $1,050 to be received without being taxed and the next $1,050 to be taxed at the child's rate, while any unearned income in excess of $2,100 is taxed at the parent's top marginal rate. My daughter has $3,435 unearned income as capital gain in 2017. Since this amount is more than $2,100, I have to file form 1040 and 8816 as Kiddie tax for her. Now I have problem on Virginia State Tax: 1) Federal Adjusted Gross Income is $2,385, but why TurboTax shows $3,435 not $2,385? 2) I have claimed my daughter to be my dependent, but why TurboTax shows 1 exemption of $930 and makes VA Taxable Income to be $2,505? 3) Even though VA Taxable Income is $2,505, but why TurboTax shows Amount of Tax is $0? Are there any Virginia tax exemptions for kiddie tax that I am not aware?

[Karen1209]

Per Virginia's Department of Taxation, the $1050 federal Kiddie Tax exclusion is not allowed to be excluded for state calculations:

The department's long-standing policy has been that the Virginia taxable income of a parent making the federal election includes that portion of federal adjusted gross income (FAGI) representing the income of a child. This is because of the statutory requirement in Va. Code §58.1-322 that the Virginia taxable income of an individual taxpayer equal that individual's FAGI for the year.

As such, the parent may not subtract that portion of FAGI which represents the income of the child, when computing his or her Virginia income tax liability. In the case of a combined (filing status 4) return where each spouse reports his or her income, the income of the child may be allocated either to the husband or the wife, so long as the total FAGI listed on their Virginia return equals the FAGI reported on their federal return.

https://www.tax.virginia.gov/laws-rules-decisions/tax-bulletins/92-11