The IRS doesn’t age-discriminate when it comes to collecting taxes. If you earn income, they’ll want their piece of the pie. This includes your children who may be making some cash by pet sitting for the neighbors, providing lawn services, or even saving up for college with a summer job. As a parent, it’s important to understand not only when your child is required to pay taxes, but also how to file them. Here’s what you need to know.
Does My Child Need to File Taxes?
Although many children earn money, not all will be required to file taxes. If your child meets any of the following conditions, however, they will need to submit a tax return:
- Earned income that exceeds the current tax year’s standard deduction for a single filer (for 2023, that’s $13,850).
- Unearned income of $1,250 or more (tax year 2023). This typically includes dividends and interest from banking accounts or investments, as well as scholarship or grant money not used for qualified expenses. For example, if your 19-year-old son received scholarship money that covered his housing and meals at college, those funds are considered unearned income.
- Self-employment income of $400 or more (tax year 2023).
If your child has both earned and unearned income, they may still need to file if the above thresholds aren’t met. For the 2023 tax year, the IRS requires a minor to file if they have gross income (all sources) greater than the larger of $1,250 or earned income plus $400 (up to $13, 450).
What Tax Forms Should My Child Use?
Like most taxpayers, your child will use IRS Form 1040 if they have any earned income or self-employment income. If they have unearned income to claim, they’ll also need to complete IRS Form 8615.
Not Required to File? Your Child May Still Want to Submit a Return
Even if your child does not meet any of the required income thresholds, they may still want to file if they have any earned income. Why? They could be due a refund of the taxes withheld from their paychecks.
Can I Still Claim My Child as a Dependent If They File a Return?
Yes! If your child meets the criteria to be claimed as a dependent, such as being under the age of 19, or under 24 if a full-time student, and not providing more than half of their own support, you can still claim them on your tax return. However, it’s important to coordinate with your child to ensure that you both accurately report your income and deductions.
Can I Claim My Child’s Income on My Return?
Under certain conditions, you may be able to skip filing a return for your child and instead include their income on your tax return using IRS Form 8814. This is an option if your child only has unearned income above $1,250 and no other income sources (self-employment or earned). Additionally, if the unearned income is only from interest and dividends, it cannot exceed $12,500.
Just be aware that the tax you owe may be greater than what your child would have owed by filing an individual return. The added income may also reduce some deductions you can take or affect your eligibility for certain tax credits.
Final Thoughts
Understanding the tax responsibilities for kids is essential for every parent. By familiarizing yourself with the rules surrounding children and taxes, you can ensure that you and your child comply with the tax laws and maximize your tax benefits. Remember to consult with a tax professional or utilize tax software to navigate the complexities of filing taxes for your child. By teaching your child about taxes and financial responsibility, you are equipping them with valuable life skills that will benefit them in the long run. Stay informed, stay organized, and make the most of the tax advantages available to you and your child.