Five Key Points about Children with Investment Income
Special tax rules may apply to some children who receive investment income.
The rules may affect the amount of tax and how to report the income. Here are
five key points to keep in mind if your child has investment income:
Investment income generally includes interest, dividends and capital gains. It
also includes other unearned income, such as from a trust
Parentís Tax Rate.
If your child's total investment income is more than $2,000 then your tax rate
may apply to part of that income instead of your child's tax rate. See the
Form 8615, Tax for Certain Children Who Have Unearned Income.
You may be able to include your childís investment income on your tax return
if it was less than $10,000 for the year. If you make this choice, then your
child will not have to file his or her own return. See
Form 8814, Parents' Election to Report Child's Interest and Dividends, for more.
If your childís investment income was $10,000 or more in 2014 then the child
must file their own return. File
Form 8615 with the childís federal tax return.
Net Investment Income Tax.
Your child may be subject to the Net Investment Income Tax if they must file
Form 8615. Use
Form 8960, Net Investment Income Tax, to figure this tax.
Refer to IRS
Publication 929, Tax Rules for Children and Dependents, for complete details on this topic.