Child's Income

[Aropa12]

My daughter is 16 and is required to file a tax return for 2021 because she has:
- Unearned income (interest, dividends, capital gains distributions) of more than $1,100.
- Earned income (wages) of $419.00.

When I complete her return via TT, it says she owes Federal taxes of $3,077.00 on total income of $8712.00 (wages $419, interest & dividends $2606, Capital Gain Distributions $5687). She is only receiving $1100 as a standard deduction. She is also being claimed as a dependent on our tax return. She does not owe any state tax. This amount owed seems high. Since she is single and making less than $10,000, she should be taxed at 10%. I cannot figure out why this amount owed is so high?

[nimtx]

I had a similar issue with my kids.  Since you are claiming your child as a dependent, her income gets added to yours, and tax is based on the combined income and tax bracket.  

[Aropa12]

Thank you for this information. I suspected this was the case. 

Would it be best if I claim a portion of her income (unearned - dividends, capital gain distributions) on my return and just file her return for the earned income only? Or would I essentially owe the same amount either way? 

[RaifH]

No, you can't include your child's income on your return unless all their income is from interest and dividends, including capital gains distributions. Since she has some earned income, you cannot make this election. 

It would not make a difference anyway, the tax would be the same either way if she had no earned income, it just saves you the hassle of having to file a return for the child. Your child's unearned income is taxed at your rates after the first $2,200. The first $2,200 of unearned income is taxed at her rate. Her earned income is also taxed at her rate.  

That tax still seems high on that level of income. Are you sure that is only her federal tax? If so, I would check the entries and make sure that everything is reported correctly. 

@Aropa12