Parents may not realize that there are tax rules that may affect their child's investment income. The IRS offers the following four facts to help parents determine whether their child's investment income will be taxed at the parents' rate or the child's rate.

  1. Investment income Children with investment income may have part or all of this income taxed at their parents' tax rate rather than at the child's rate. Investment income includes interest, dividends, capital gains and other unearned income.
  2. Age requirement The child's tax must be figured using the parents' rates if the child has investment income of more than $1,900 and meets one of three age requirements for 2011:
    • Was under age 18 at the end of the year,
    • Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or
    • Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support.
  3. Form 8615 To figure the child's tax using the parents' rate for the child's return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return.
  4. Form 8814 When certain conditions are met, 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. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends.

More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available on this website or by calling 800-TAX-FORM (800-829-3676).

Both TaxACT Free Edition and Deluxe include Forms 8615 and 8814. Start your TaxACT Online return now for step-by-step guidance.

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Upcoming Tax Dates

January 1 Everyone
Federal Holiday (New Year's Day) - Details

January 12Employees who work for tips
If you received $20 or more in tips during December, report them to your employer - Details

January 12Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the first 15 days of December 2014.

January 14Regular method taxes
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Make a payment of your estimated tax for 2014 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES - Details

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If the monthly deposit rule applies, deposit the tax for payments in December 2014

January 15 Nonpayroll withholding.
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January 20 Everyone
Federal Holiday (Birthday of Martin Luther King, Jr./Inauguration Day) - Details

January 27 Communications and air transportation taxes under the alternative method.
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January 29 — Regular method taxes
Deposit the tax for the first 15 days of January.

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