Kiddy tax more than threshhold

[Spring 88]

Dear Experts:

Can you please help me with this question that Turbo Tax doesn't address?

My two kids received more than $2,700 interest payments from T bill.  If they will file 8615, it seems they need to file their own 1040?  Is it correct?

If so, as parents we will not include any info of theirs in our tax return?

Thanks,

Don

[DawnC]

Do they have earned income as well?   How you report your child's investment (unearned) income depends on how much they've made.   A person is considered your child if they're a dependent under the age of 19 (24 if a full-time student) as of December 31, 2024.

• If your child's only income is unearned and doesn't exceed $1,300, it doesn't need to be reported on any return.
• If your child's unearned income is between $1,300 and $14,600, they may need to file their own return, but in certain situations, this income can be included on your return.  Follow the instructions here to see what your best option is. 
• If your child's unearned income is $14,600 or more, they need to file their own return.  In this case, you would not include any of their income on your return, but you could still claim them as dependents if they are your qualifying child. **

The Kiddie Tax applies if your child:

• has unearned income (usually from investments) exceeding $2,600
• is required to file a return
• isn’t filing jointly
• is under age 18 (or under age 24 if a full-time student) as of January 1, 2025

**  If their gross income (earned plus unearned) exceeds the larger of $1,300 or their earned income (up to $14,200) plus $400 - they are required to file and you would not include any of their income on your return even if you claim them as dependents.

[Spring 88]

Dear Dawn:
Thanks for your great advice.  They are in your 2 category, no earned income and have $2,700 interests only. 

If they files their own returns, they may not owe any taxes.  If we file with them under their names,  we would definitely pay more taxes.  Will it the case?

If they file their own returns, can we as parent still be able to claim for Healthcare Saving Account as well as  Flexible spending account for dependent care expenses?

Thanks for your advice!

Don 

[JohnB5677]

I'm not sure if their is an advantage to having them file with you, or independently.

• If you decide to have them file for themselves you can still claim them, and they will get at least a $1,300 deduction.
• If you file separate returns for them, and  you claim as your dependents, the Healthcare Saving Account is still in effect.

Please see IRS Standard Deduction > Dependents