Kids Income to be taxed

[jcskweres]

I  have a 13 year old daughter who made some income.  How much income can she make before she is taxed at my rate for federal?  How much for state (I'm in Wisconsin)?  Thanks SO much in advance!

[SweetieJean]

What type of income? W-2? 1099-MISC? Investments?

[jcskweres]

income from babysitting, mowing, and yard work for neightbors.  We plan on contributing to her Roth in the amount she earns (which we will keep documentation of)

[Carl]

Then she is self-employed and will need to file her own separate tax return, which will include a SCH C. When she starts her return, she must select the option for "I can be claimed on someone else's tax return". If she does not select this, then you will not be able to claim her as your dependent. It will have no effect on contributions to her ROTH.
Understand that contributions to a ROTH are ***NOT*** tax deferred. So she will pay taxes on any income in excess of $6400. The maximum amount that she can contribute to her ROTH is the "LESSER" of $5,500 or what  she earns for the tax year.
Keep in mind also, that if she has more than $400 of self-employment income, then while she may not pay the regular income tax if the total earnings are under $6400, she *will* pay the additional 12.6% self-employment tax. So if she earns "exactly" $5500 for the year, that only leaves $4807 to contribute to the ROTH after paying the $693 self-employment tax.
The self-employment tax is basically the employer side of social security and Medicare.

[jcskweres]

rocking!  thanks

[Hal_Al]

The self-employment tax is both the employer side of social security and Medicare and the employee's side.

[Hal_Al]

She may be able to avoid some of the self employment tax. The work she is doing might be classified as "household employee" income, rather than self employment income; the baby sitting income in particular. As long as she did the sitting in the customers home (not her/your home), it is household employee income. Since she is under 18, there is no $ limit on how much she can make.
If she used her/your lawn mower, instead of the customer's, it is less likely that she can call the lawn work household employee wages.
If she made less than $6350 for the year, she would pay no tax as a household employee. She would still want to report the income to be able to make a Roth contribution

[Hal_Al · Accepted solution]

 "How much income can she make before she is taxed at my rate for federal?"

As long as the child's income is earned income like baby sitting and yard work, none of it is taxed at the parent's tax rate, no matter how much she makes. The $6400 threshold (actually $6350 for 2017) refers to when she will start paying any income tax.

Only if she has investment income (interest dividends, capital gains) will some of her income  be taxed at the parent's tax rate. Investment income over $2100* is subject to the so called "kiddie tax" (income taxed at the parent's rate).

*Filing a Kiddie tax form (form 8615)is required with only $1050 of investment income, even though the kiddie tax doesn't kick in until $2100.