You have two options and both of these options depend on a couple of details that are not apparent in your question.
- You can include the income in your return
- or you can file a tax return on behalf of your child.
Additionally if the Unearned Income was less than $1050.00 it does not have to be reported. If the child has Unearned Income in excess of $10,500.00 they must file their own tax return. For amounts in between $1,050.00 and $10,500.00 you have the choice of placing this income in your Tax Return or having the child file their own return. If you choose to include your child's income in your Tax Return this will increase the amount of Taxable Income in your Tax Return which in turn can lead to, being placed in a higher tax bracket and loosing certain credits or deductions.
The Rules used to determine this are called the Kiddie Tax Rules. The Kiddie Tax allows your child's unearned income to be taxed in steps. It allows an immediate deduction of $1050.00, the next $1050.00 are taxed at the child's tax rate. The rest of the money is taxed at the parent's rate. The Kiddie Tax applies if:
- Child's Age < 18
- Child's Age 18 and Child’s earned income ? 50% of his support.
- Child's Age 19-23 Child is a full-time student and earned income ? 50% of his support.
Above age 23 the Kiddie Tax Rule is completely phased-out. The kiddie tax rules do not apply if child
- Is married and files a joint return or
- Does not have at least one living parent at year-end.
- For 2016, the age of a child with a January 1 birthday is determined as of January 1, 2017.
- They only had earned income;
- They are not required to file because their income is below the filing threshold.
If you chose to include this income on your Tax Return please follow the instructions in the FAQ below. Otherwise you will simply create an account for your child in TurboTax Online so that you may file on their behalf. You are allowed up to 5 different accounts for 5 different returns on the same email with TurboTax Online.
https://ttlc.intuit.com/replies/3302004
