Information from irs.gov
There are specific tax rules that may apply to some children who receive investment income. The rules may affect the amount of tax and how to report the income. Keep the following in mind if your child has investment income:
- Investment Income usually includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.
- Parent’s Tax Rate, instead of the child’s tax rate, may apply to part of your child’s total investment income if it is more than $2,100. Form 8615, Tax for Certain Children Who Have Unearned Income, should be used.
- Parent’s Return. You may be able to include your child’s investment income on your tax return if it was less than $10,500 for the year. If you make this choice, then your child will not have to file his or her own return. Use Form 8814, Parents’ Election to Report Child’s Interest and Dividends.
- Child’s Return. If your child’s investment income was $10,500 or more in 2015 then the child must file their own return. Include Form 8615 with the child’s federal tax return.
- Net Investment Income Tax may apply to your child if they file Form 8615. Use Form 8960 to figure this tax.
If you are uncertain regarding whether or not your child needs to file a tax return, give us a call and we will discuss your situation in detail.
