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Kiddy tax

Q1: If a child is 10 years old and have an interest income of $2400 from ibond (i.e., less than $2500) in 2023, and it was the only income that the child had in 2023, should this be reported on the parents' income tax return or on a kiddy tax return?

 

Q2: Is there a difference in the amount of tax to be paid filing either on parents' return or a kiddy tax return?  

 

Q3: If one files kiddy tax, which form should one use? 1040 ES? I assume that if you file Federal kiddy tax, you should also file the state kiddy tax, correct? 

 

Thanks.

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5 Replies

Kiddy tax

Since the amount was less than $2,500 Kiddie Tax does not apply. The income can be deleting it on the child’s return or you can elect to report it on yours. Details here:

 

https://www.irs.gov/publications/p501#en_US_2023_publink1000220711

Kiddy tax

Thanks.  It is better to file for the child to get lower overall tax?  To file for the child, which form to use, 1040ES? Thanks

rjs
Level 15
Level 15

Kiddy tax

It's almost always better to file a separate tax return for the child. You might end up paying more tax if you include the child's interest income on the parents' tax return.


Form 1040-ES is not a tax return. All tax returns are filed on Form 1040. If you use TurboTax to prepare the child's tax return, TurboTax will fill out the proper forms. If you are using TurboTax Online, you should be able to use TurboTax Free Edition for the child's return.

 

Kiddy tax

a few more questions on kiddy tax on unearned income less than $2500 but more than $1250

 

1. Since we claim the child as a dependent on our income tax returns, does it affect his tax return for the $2400 unearned income?

 

2. If the minor child files income tax return for the unearned income, what forms to be included? 1040 + 8615?  Am I right that one reports the iBond interest income on Form 8615 but not on Schedule B?

 

Kiddy tax

New Jersey adopts the federal definition of "dependent". A minor child must file a New Jersey gross income tax return if he or she has income that meets the filing threshold. New Jersey has no provision similar to IRC Sec. 1(g) (commonly referred to as the "kiddie tax"), which applies tax to certain unearned income of a minor child at the highest marginal tax rate of the child's parents and allows the parents to elect to report the child's income on their return.

 

You claim the child as a dependent as usual. When filing the child’s return be sure to check the box saying someone else can claim him. TurboTax will generate the necessary Kiddie tax form on his return if required. 

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