The Kiddie Tax can be reported on the either the parent's (using Form 8615) or child's tax return.
Usually, the best way to handle the Kiddie Tax is for the child to file their own tax return, as including the child's income on the parents return has other requirements.
These requirements must be met to include a child's income on the parents' tax return:
- Form 8814 must be used.
- The child was under age 19 (or under age 24 if a full-time student) at the end of 2014.
- The child’s only income was from interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends.
- The child’s gross income for 2014 was less than $10,000.
- The child is required to file a 2014 return.
- The child does not file a married filing jointly (MFJ) tax return for 2014.
- There were no estimated tax payments for the child for 2014 (including any overpayment of tax from his or her 2013 return applied to 2014 estimated tax).
- There was no federal income tax withheld from the child’s income.
However, there are circumstances when you want to have the child file their own tax return. One example is when a child’s income is added to the parents’ tax return, the additional income can cause unwanted tax effects.
In our next blog post, we will discuss the strategies to avoid kiddie tax.