Tax on Child's Investment Income
To figure the child's tax using this method, fill out Form 8615 , "Tax for Children Under Age 14 Who Have Investment Income of More Than $1,500," and attach it to the child's federal income tax return.
Alternatively, a parent can, in many cases, choose to report the child's investment income on the parent's own tax return. Generally speaking, this option is available if the child's income consists entirely of interest and dividends (including capital gain distributions) and the amount received is less than $7,000. Eligible parents can choose this option by filling out Form 8814 , "Parent's Election to Report Child's Interest and Dividends," and including it with their tax return.
These special tax rules do not apply to investment income received by children who are age 14 and over. In addition, wages and other earned income received by a child of any age are taxed at the child's normal rate.
More information can be found in IRS Publication 929 , "Tax Rules for Children and Dependents," or by contacting your tax preparer.
This daily Tax Tip has been provided by the Internal Revenue Service.