Series I-Bond intrest income for dependent (17yr old)

[JayKP]

Hello,

we bought Series I-bond on my son name when he was 16 (as minor under our account). We cash it out before he turned 18th (still under minor). We got 1099-INT on his name. We are claiming him as dependent and this interest is only under his name, no other income or interest. We, I and spouse, has our own 1099-INT for our I-bond. So how we file my son's 1099-INT under our tax return? 

Thanks

[LindaS5247 · Accepted solution]

If your dependent son made less than $1,300 in interest, dividends, and capital gains distributions combined, and that was his only source of income, then his income doesn't need to be reported on your (or any) tax return.

Your dependent children must file a tax return if they earn certain amounts of income during the year. 

Taxpayers claimed as dependents have different filing requirements than those that are not claimed as dependents, so you should make sure that your child is eligible to be your dependent.

Dependent children who have earned income of more than $14,600 of income in 2024 generally must to file an income tax return and may owe income tax. Earned income applies to wages and salaries your child receives as a result of providing services to an employer or from self-employment, even if only through a part-time job.

The rules for filing a tax return do change when your dependent child receives income from sources other than employment, such as investment income including interest and dividend payments. For 2024, if the  total investment income is in excess of $1,300, then a tax return must be filed for your dependent child.

If this is not the case you can report his interest income as reported on his Form 1099-INT:

1. Open/continue your tax return you will enter it in the "Child Income" section of TurboTax :
   • If you are using TurboTax Online/Mobile: Click on this link: child income.
   • If you are using TurboTax Desktop: Click on the search icon in the top right of your TurboTax screen, Type "child income" in the search box and click on "Jump to child income"  
2. TurboTax will ask you questions to determine if your son's income needs to be reported on a tax return. You may be able to report it on your return or their return.

Your screen will look something like this:

Click here for "Do I need to report my child's 1099-INT on my return?"

Click here for "Tax Filing Requirements for Children"

[JayKP]

@LindaS5247 Thanks for the reply. With This I-bond cash out, his 1099-Int shows $1240 in box 1, which is less than $1300. And this is only income he has. No other interest, div or earned income (W-2). 

So in this case,

1. do we required to show this under our filing? 

2. if it is not required to report under our or his own file, and if we still show this under return, will we "penalized" with kiddie tax or any other tax?

Thanks

[SusanY1]

No, you do not need to report this interest on your return or his own since it is under the $1300 threshold that requires reporting this type of income. 

[JayKP]

@SusanY1 Thanks for the reply and information.

Just for my knowledge (i know the rule and law may change), but for an example, what if my son got $1301 as interest and only income, then do he need to file his own return or I still can report this under mine? This is just i am asking as curiosity. 

[SusanY1 · Accepted solution]

$1301 in unearned income (such as interest, dividends, capital gains)  triggers a filing requirement (for the 2024 tax year).  At that time if all of the child's income is unearned income, it can be included on the parent's return in the area for children's income reported on a parent's return (it is not included as if it belongs to the parent.)   

You could elect to file a return for the child separately, but the result would be the same since the tax rate for the child depends on the income of the parent in this instance (that's the "kiddie tax").  

If the child has unearned income plus earned income (such as from a part-time job), then he must file his own return reporting both the earned income and the unearned income on a single combined return.  The unearned portion of income is still subject to kiddie tax here also.