You may be surprised to learn that your child is a separate taxpayer, even as a minor. If your kids recently started working, or otherwise earning income, they may need to file a tax return this year. How much does your child have to make? Don’t panic, if they only had earned income from wages, they have to file only if their income exceeds the standard deduction for the tax year: $13,850 for 2023 and $14,600 for 2024.
If your child is required to file, their income may impact your tax liability.
The filing threshold is much lower for other types of income. For the 2023 tax year they must file if they received $400 or more for tips or self-employment income. For unearned income the filing threshold is $1,250. If your child has more than $2,500 in unearned income, they will be taxed at the parent’s rate, unless the child’s rate is higher. This is known as the “kiddie tax!” You can use Form 8615 to calculate tax liability for your child on unearned income above $2,500.
At one time it was possible to report a child’s income on your own return if it consisted entirely of dividends and interest, but Congress eliminated this alternative for tax years 2018 through 2025. You may have the option to report your child’s income on your tax return if they have less than $12,500 in unearned income. The IRS Publication 501 has more information on this. You do not need to claim your child’s income on your tax return, but the IRS holds parents and guardians responsible when minors can’t file on their own. Your child doesn’t have to be of legal age to sign an income tax return. You will need to sign for them, if they cannot sign a return. You will need to “sign the child’s name followed by the word by, then your signature, and your relationship, such as parent or guardian per the IRS. If you sign the return and the IRS ends up having questions, they can deal directly with you. If your child signs the return, there will be limits on what they can discuss with you and what actions you can take to resolve any issues, at least until you have a valid power of attorney to act on your child’s behalf.
Minors can usually file a tax return without it harming your ability to claim them as a dependent. But of course, there are some exceptions. In order to be considered a “Qualifying Child”, they cannot contribute more than half of their own financial support and still be considered dependent. In most cases, the minor must have lived with you for more than half of the year. There also exceptions to this rule such as children who are away at college, or on vacation, or absent due to illness.
Reach out to us: You can pay income tax for your child from your own money, of course, but generally when you do that you’re making a gift to your child. Our TFG Accounting and Tax professionals can help you sort through the rules and exceptions if you believe your child needs to file a return. Contact us at CPA@fuoco.com or 855-542-7537.
