A dependent child has a filing requirement if they meet any of the below thresholds:
- Unearned income over $1,250.
- Earned income over $13,850.
- Gross income more than the larger of $1,250 or earned income (up to $13,450) plus $400.
- Net earnings from self-employment income of at least $400
As such, if your son's only income is the interest on the Treasury Bills of $1,250 or less, then there is no filing requirement and no taxes are paid on the income. You would NOT include this income on your tax return.
If, however, the interest income (or any other unearned income) exceeds $1,250 then the child would have a filing requirement and could be subject to the "Kiddie Tax", meaning some of the unearned income is taxed at the parents' tax rate instead of the child's tax rate. This would be calculated on this child's tax return on Form 8615.
Note that in certain cases, if the child is required to file a return, the parents may qualify to report the child's income on their return instead. The parents would use Form 8814 to report the child's income on their return. This option can be used only if all the following are true:
- The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year.
- The child’s gross income is less than $12,500.
- The child’s only income is from interest, dividends, capital gain distributions, and Alaska Permanent Fund Dividends.
- The child does not file a joint return.
- No federal income tax was withheld from the child’s income.
- No estimated tax payments were made for the child.
Note that, if the parents are not Married Filing Jointly, there are specific rules as to which parent is that one that would be required to include the child's income on their tax return - the parents cannot choose which one will include the child's income on their Form 8814.
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