Landmark Tax Group

Tax Rules for Children with Investments

INTERNAL REVENUE SERVICE – Some children receive investment income and are required to file a federal tax return. If a child cannot file his or her own tax return for any reason, such as age, the child’s parent or guardian is responsible for filing a return on the child’s behalf.

There are special tax rules that affect how parents report a child’s investment income. Some parents can include their child’s investment income on their tax return. Other children may have to file their own tax return.

Here are four facts from the IRS about the taxability of your child’s investment income:

1. Investment income normally includes interest, dividends, capital gains and other unearned income, such as from a trust.

2. Special rules apply if your child’s total investment income is more than $2,000. The parent’s tax rate may apply to part of that income instead of the child’s tax rate.

3. If your child’s total interest and dividend income was less than $10,000 last year, you may be able to include the income on your tax return. See Form 8814, Parents’ Election to Report Child’s Interest and Dividends. If you make this choice, the child does not file a return.

4. Your child must file their own tax return if they received investment income of $10,000 or more. File Form 8615, Tax for Certain Children Who Have Investment Income, with the child’s federal tax return.

See: 8 Tax Benefits for Parents

See: 6 Ways to Reduce Your Chance of an IRS Audit

“You appear to have moved mountains.  I could not have done any of this without you.  My sincere thanks.” - Patricia C.
(More Client Testimonials)

For immediate assistance with investment income, or another tax matter, contact us today at 1-714-382-6780 for a FREE and CONFIDENTIAL consultation with our CPAs and former IRS Agents.  

More IRS News and Information

As Featured In