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IRS.gov Website
Rev. date: 1/17/2018


Tax on a Child's Investment and Other Unearned Income (Kiddie Tax)

Tax Topic 553
rule
The following two rules may affect the tax and reporting of the unearned income of certain children:
  1. If the child's interest, dividends, and other unearned income total more than $2,100, part of that income may be subject to tax at the parent's tax rate instead of the child's tax rate. See the Instructions 8615, Tax for Certain Children Who Have Unearned Income, or
  2. If the child's only income is interest and dividend income (including capital gain distributions) and totals less than $10,500, the child's parent may be able to elect to include that income on the parent's return rather than file a return for the child. See Form 8814, Parents' Election To Report Child's Interest and Dividends.
For either rule to apply, the child must be required to file a return. For filing requirement information, see Publication 929, Tax Rules for Children and Dependents, and Do I Need to File a Tax Return?


Child's Tax Return

rule
Figure the child's tax on Form 8615, Tax for Certain Children Who Have Unearned Income, and attach it to the child's tax return when:
  1. The child's unearned income was more than $2,100
  2. The child meets one of the following age requirements:
    • The child was under age 18 at the end of the tax year
    • The child was age 18 but less than 19 at the end of the tax year and the child's earned income didn't exceed one-half of the child's own support for the year (excluding scholarships if the child was a full-time student), or
    • The child was a full-time student who was at least 19 and under age 24 at the end of the tax year and the child's earned income didn't exceed one-half of the child's own support for the year (excluding scholarships)
  3. At least one of the child's parents was alive at the end of the tax year
  4. The child is required to file a tax return for the tax year, and
  5. The child doesn't file a joint return for the tax year
A child required to file Form 8615 may be subject to the Net Investment Income Tax (NIIT). NIIT is a 3.8% tax on the lesser of net investment income or the excess of the child's modified adjusted gross income (MAGI) over a threshold amount. Use Form 8960, Net Investment Income Tax, to figure this tax. For more information, see Tax Topic 559 and Questions and Answers on the Net Investment Income Tax.


Parent's Tax Return

rule
A parent may be able to avoid having to file a tax return for the child by including the child's income on the parent's tax return. To make this election, attach Form 8814, Parents' Election to Report Child's Interest and Dividends, to your Form 1040 or Form 1040-NR when:
  1. At the end of the tax year the child was under age 19 or under age 24, if a full-time student
  2. The child's interest and dividend income was less than $10,500 for the tax year
  3. The child had income only from interest and dividends, which includes Alaska Permanent Fund dividends and capital gain distributions
  4. No estimated tax payments were made for the tax year, and no prior tax year's tax overpayment was applied to the current tax year estimated tax, under the child's name and social security number
  5. No federal income tax was withheld from the child's income under backup withholding
  6. The child is required to file a return unless the parent makes this election
  7. The child doesn't file a joint return for the tax year
  8. The parent is the parent qualified to make the election or files a joint return with the child's other parent


Additional Information

rule
Refer to Publication 929, Tax Rules for Children and Dependents, for more information, definitions, considerations, and the following issues: