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Level 3

# TurboTax 2021 Kiddie Tax calculation

I'm unsure if TurboTax is correctly calculating kiddie tax.  I'm reporting my 7 year old's (UTMA investment account) unearned Dividend Income in 2021 of \$2,199 under my Tax return. Turbotax calculates this as \$110 in taxes  (in other words at 10% childs rate of the amount over \$1,100)....Okay...but.....

The Turbotax articles explain "Remember that the Kiddie Tax only applies to the unearned income in excess of \$2,200.  However that same article goes on to provide the following illustration for 2021which contradicts this as follows.  I'm Confused!

1. \$0-\$1,100 isn't Taxed

2. \$1,100 - 2,200 is taxed at child's rate

3. Over \$2,200 is taxed at parents rate.

So is there tax applicable only over @\$2,200 or does it start over \$1,100 threshold?

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Level 15

## TurboTax 2021 Kiddie Tax calculation

there are two ways to report the child tax - they file their own return and use form 8615 to computer their tax \$2200 of unearned income is exempt

the other, which can only be done if the child has no earned income is for the parent to include the child income on their return through form 8814

\$0 through \$1100 exempt

\$1101 to \$2200 first subtract \$1100 and then multiply by 10%

\$2201 to \$11000  subtract \$2200  this is taxed at parents rate

you're using the 8814 method so the child tax would be  \$110.

8814 can't be used if unearned income of a child is more than \$11000

2 Replies
Level 15

## TurboTax 2021 Kiddie Tax calculation

there are two ways to report the child tax - they file their own return and use form 8615 to computer their tax \$2200 of unearned income is exempt

the other, which can only be done if the child has no earned income is for the parent to include the child income on their return through form 8814

\$0 through \$1100 exempt

\$1101 to \$2200 first subtract \$1100 and then multiply by 10%

\$2201 to \$11000  subtract \$2200  this is taxed at parents rate

you're using the 8814 method so the child tax would be  \$110.

8814 can't be used if unearned income of a child is more than \$11000

Level 3

## TurboTax 2021 Kiddie Tax calculation

@Mike9241 Thank you..excellent.

Confirmation my understanding of your explanation is correct please....So if I choose to file a tax return for my 7 year old daughter using Form 8615 with her own tax return , she will have no tax to pay as her unearned income is actually \$2,199 . This would save me paying the \$110 tax  required  if I were to file her under my tax return using form 8814. ?

By the way.. I think the guidance TT offers in articles needs to be updated  to state the \$2,200 exemption is only applicable the child has their own return otherwise the breakpoint is \$1,100 when Kiddie tax starts to apply.