My son has collectibles that he's had for years. He has started selling them to pay for college. Does he have to pay tax on them when he's a student typically exempt?

[Rainman12]

Yes. Student status is irrelevant; Dependent status Does matter. There's a special 28% capital gains rate on profit made from selling 'collectibles'. Capital gains are considered Passive Income. If he's your dependent, then max untaxed passive income he can have is $350. If he had a regular W-2 job, he could have up to $12k go untaxed.

[Hal_Al · Accepted solution]

Students are not tax exempt. Age and student status do not get you out of filing a tax return. In fact, being a dependent means you actually have a lower filing threshold, if his income is from unearned income (such as selling collectibles). 

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. A dependent  must file a tax return for 2018 if he had any of the following:

1.         Total income (wages, salaries, taxable scholarship etc.) of more than $12,000 ($6350 in 2017).

2.         Unearned income (interest, dividends, capital gains) of more than $1050.

3.         Unearned income over $350 and gross income of more than $1050

4.         Household employee income (e.g. baby sitting, lawn mowing) over $2100 ($12.000 if under age 18)

5.         Other self employment income over $400, including box 7 of a 1099-MISC

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.

The 28% tax rate on the gain from the sale of collectibles is a maximum rate; for most people it is less.