;
 

Search Help Topics:

The choice to file Form 8814 Parents’ Election To Report Child’s Interest and Dividends with the parents' return or Form 8615 Tax for Certain Children Who Have Unearned Income with the child's return is one to be made by the preparer of the return.

Per IRS Publication 929 Tax Rules for Children and Dependents, on page 9:

The two rules that follow may affect the tax on the unearned income of certain children.

  1. If the child's interest and dividend income (including capital gain distributions) total less than $11,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. (See Parent's Election To Report Child's Interest and Dividends, later.)
  2. If the child’s interest, dividends, and other unearned income total more than $2,200, the child’s income is taxed at special tax rates. (See Tax for Certain Children Who Have Unearned Income, later.)

For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent.

These rules don’t apply if neither of the child's parents were living at the end of the year.

To determine where to claim your child's investment income and what form to use for that reporting:

Federal Form 8615

To enter the amounts in the TaxAct® program which will transfer to Form 8615:

  1. From within your TaxAct return (Online or Desktop), click Tools down the left to expand, then click Forms Assistant. On smaller devices, click in the upper left-hand corner, then click Tools.
  2. Click to expand the FEDERAL Forms folder, then click to expand the Forms & Schedules folder.
  3. Click Form 8615 - Tax For Certain Children Who Have Unearned Income, then click Add.
  4. Continue with the interview process to enter all of the appropriate information.

Per IRS Instructions for Form 8615 on page 1:

Purpose of Form

Use Form 8615 to figure your tax on unearned income over $2,200 if you are under age 18, and in certain situations if you are older. See Who Must File, later.

Unearned Income

For Form 8615, “unearned income” includes all taxable income other than earned income. Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.

Who Must File

Form 8615 must be filed for anyone who meets all of the following conditions.

  1. You had more than $2,200 of unearned income.
  2. You are required to file a tax return.
  3. You were either:
    a. Under age 18 at the end of 2019,
    b. Age 18 at the end of 2019 and didn’t have earned income that was more than half of your support, or
    c. A full-time student at least age 19 and under age 24 at the end of 2019 and didn’t have earned income that was more than half of your support.
  4. At least one of your parents was alive at the end of 2019.
  5. You don’t file a joint return for 2019.

These rules apply if you’re legally adopted or a stepchild. These rules also apply whether or not you’re a dependent. These rules don’t apply if neither of your parents were living at the end of the year.

Support. Your support includes all amounts spent to provide you with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your support, count support provided by you, your parents, and others. However, a scholarship you received isn’t considered support if you’re a full-time student. For details, see Pub. 501, Dependents, Standard Deduction, and Filing Information.

TIP: Your parent may be able to elect to report your interest, ordinary dividends, and capital gain distributions on his or her return. If your parent makes this election, you won’t have to file a return or Form 8615. However, the federal income tax on your income, including qualified dividends and capital gain distributions, may be higher if this election is made. For more details, see Form 8814, Parents’ Election To Report Child's Interest and Dividends.

Federal Form 8814

To enter the amounts in the TaxAct program which will transfer to Form 8814:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Taxes in the Federal Quick Q&A Topics menu to expand, then click Child's interest and dividend income on your return.
  3. Click + Add Form 8814 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

If your child is required to file a return, you may elect to include your child's interest and dividend income on your return if ALL of the following conditions are met, per IRS Publication 929 Tax Rules for Children and Dependents, on page 9:

Parent's Election To Report Child's Interest and Dividends (Form 8814)

You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. If you do, your child won't have to file a return.

You can make this election only if all the following conditions are met.

  • Your child was under age 19 (or under age 24 if a full-time student) at the end of the year.
  • Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).
  • The child's gross income was less than $11,000
  • The child is required to file a return unless you make this election.
  • The child doesn’t file a joint return for the year
  • No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and SSN.
  • No federal income tax was withheld from your child's income under the backup withholding rules.
  • You are the parent whose return must be used when applying the special tax rules for children. (See Which Parent's Return To Use, later.)

You, the parent, must also qualify. Per General Instructions for Form 8814 on page 3:

Parents who qualify to make the election. You qualify to make this election if you file Form 1040, 1040-SR, or 1040-NR and any of the following apply.

  • You are filing a joint return for 2020 with the child’s other parent.
  • You and the child’s other parent were married to each other but file separate returns for 2020 and you had the higher taxable income.
  • You were unmarried, treated as unmarried for federal income tax purposes, or separated from the child’s other parent by a divorce or separate maintenance decree. The child must have lived with you for most of the year (you were the custodial parent). If you were the custodial parent and you remarried, you can make the election on a joint return with your new spouse. But if you and your new spouse do not file a joint return, you qualify to make the election only if you had higher taxable income than your new spouse.

Note: If you and the child’s other parent were not married but lived together during the year with the child, you qualify to make the election only if you are the parent with the higher taxable income.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


Was this helpful to you?