Typically, you won’t have to include your child’s income on your tax return. Depending on your child’s income, they may not need to file a tax return at all. However, regardless of whether your child must file a separate tax return, you can still claim them as a dependent under certain conditions.
Filing taxes is a rite of passage to adulthood. It may not be your child’s idea of fun, but it’s necessary. So, if your child starts a new job or earns passive income, it’s crucial to know if they need to start filing their own tax returns.
Whether your child must have a separate tax return is contingent on the amount they make and the type of income. In this article, we’ll take a closer look at this contingency, when your child must file a tax return, and what tax credits you may be eligible for with a dependent child.
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Do you have to include your child’s income on your tax return?
Generally, you don’t have to file your child’s income on your federal income tax return. In many cases, you aren’t even allowed to claim your child’s income on your tax return.
However, if your child’s gross income is below the Internal Revenue Service’s (IRS) standard deduction for their filing status, they may be able to forgo filing a tax return. You may also claim your child as a dependent for tax-saving advantages.
When must your child file a tax return?
For federal income tax purposes, whether your child has to file a tax return depends solely on their income, not their age. The IRS looks at two types of income: unearned and earned income.
What is earned income vs. unearned income?
If your child works for an employer, they’re most likely making earned income. This “includes all the taxable income and wages you get from working for someone else, yourself, or from a business or farm you own,” according to the IRS. Likewise, earned income can also include earnings from scholarships or fellowship grants.
According to the IRS, unearned income
is from investment-related earnings, including but not limited to:
- Interest, dividends, capital gains (including capital gain distributions and Alaska Permanent Fund dividends)
- Social security
- Pension payments
- Distributions from trusts
- Unemployment compensation
For the most part, of course, your child won’t receive any unearned income, so the only income you should need to consider is earned income.
Filing requirements for a child’s unearned income or earned income
To determine whether you must file a tax return for your child, consider the requirements below. In this case, the “threshold amount” refers to the values in the table below.
- If your child is under 65, not blind, and only makes earned income, they don’t need to file a tax return if their earnings are less than the threshold amount.
- If your child only makes unearned income, they don’t need to file a tax return if their gross income is less than $1,250.
- Your maximum earned and unearned income amount may also vary based on whether you’re blind, married, or single.
|Standard Deduction for Dependents (2023)
|Single, under 65 and not blind
|Single, 65 or older or blind*
|Married, under 65 and not blind
|Married, 65 or older or blind*
|*Deductions listed from the 2022 IRS publication, as no 2023 information is yet available.
What if your child makes both earned and unearned income?
If your child makes both earned and unearned income, you probably won’t be able to include them in your tax returns. Generally, if your child has both types of unearned income, they must file a tax return. However, you may need some quick math to figure that out.
Your child doesn’t need to file a tax return if their gross income (earned and unearned) is either:
- Less than the threshold amount
- Less than their earned income plus $400
If the lesser amount is above $13,850, then your child must file a tax return.
Scenario: Abby is a 21-year-old, single, full-time student college student. She makes $200 unearned interest and $2,750 from her job.
Filing requirement worksheet from the IRS
- Dependent’s earned income + $400 = $3,150
- Minimum amount = $1,250
- Enter the larger amount of lines 1 and 2 = $3,150
- Maximum amount = $13,850
- Enter the smaller amount of lines 3 and 4 = $3,150
- Dependent’s gross income = $2,950
If the amount on line 6 exceeds line 5, the child must file a separate tax return. In this case, Abby doesn’t need to file a tax return.
Other filing requirements
If your child is self-employed and earns more than $400 in income, they must file a separate self-employed tax
return by completing Form 1040 and Schedule C. Also, if your child makes at least $108.28 from a qualified church-controlled organization, they must file their own tax return.
In addition to those requirements, your child must file a tax return if they owe Social Security or Medicare taxes. This may occur if your child’s employer did not withhold these taxes.
When should your child file a tax return?
Even if your child doesn’t have to file a tax return, it still may be beneficial to do so. Your child may claim taxes withheld from their employer, earn Social Security credit, and benefit from a tax-advantaged retirement account.
Above all, your child can take ownership of their finances by giving them a head start on tax literacy.
Filing to recover withheld taxes
Your child’s employer may withhold a portion of their income taxes. So, even if your child doesn’t have to file a tax return, they can still do so to recover income taxes withheld by their employer. If your child files their income tax return before January 15th, they can request an exemption from income tax by filing Form W-4.
Be aware that the 1040EZ form for simple filing is no longer available due to the Tax Cuts and Jobs Act of 2018.
Filing for Social Security work credits
If your child has a job and earns enough, they can accumulate work credits towards Social Security and Medicare benefits. In 2023, your child must make $1,640 to earn one credit and can earn up to four credits annually.
Your child must also file the appropriate tax return and pay federal and state unemployment taxes or self-employment taxes
if they work for themselves.
Filing to open an individual retirement account (IRA)
It’s never too early to start saving for retirement
. If your child earns income either through their employer or being self-employed, they can open and contribute to an individual retirement account (IRA). A traditional IRA can be fully or partially tax-deductible based on your child’s circumstances.
Consider matching your child’s contribution and taking full advantage of compounding interest before retirement. Be aware that you must stay within the IRS’s contribution limits if you opt to open an IRA for your child.
Filing to learn how
Your child will have to file taxes
at some point in their life. So, even if your child doesn’t have to file a tax return, if your child earns income, consider taking it as an opportunity to teach them how our tax system works.
Fortunately, online tax preparation software is becoming more popular. If your child needs some extra assistance filing their tax return, take a look at some of the available options below.
Why claim someone as a dependent?
If your child makes less than the standard deduction of their filing status, they don’t need to file a tax return. However, you may still claim your child as a dependent. Claiming a dependent child can save you money by lowering your tax burden and increasing your tax refund.
IMPORTANT! Be aware that just because your child qualifies as a dependent doesn’t mean they’re exempt from filing a tax return. Your child must still file their own tax return if they earn more than the standard deduction for their filing status.
Tax saving benefits for qualifying dependent child
There are quite a few advantages that come with claiming a dependent on your tax return. Some tax credit and tax deduction
- Head of household filing status. This filing status includes people who provide over half the support for qualifying dependents. Head of households have a higher standard deduction and get taxed at a lower rate than single taxpayers.
- Child tax credit. This tax-saving advantage allows households with qualifying children up to $3,600 in tax credits per qualifying child.
- Child and dependent care tax credit. This tax refund helps parents pay up to $4,000 per qualifying child for daycare.
- Earned income credit. This tax credit helps low to moderate-income households reduce their taxable income and increase their tax refund. Families who qualify may receive as much as $6,935 in credit.
- Adoption credit. This tax credit allows you to claim up to $14,440 of your adoption expenses.
- Medical expenses deduction. You may claim your qualifying child’s medical expenses as a deduction.
- American Opportunity Tax Credit and Lifetime Learning Credit. These two tax credits cover qualified education expenses, including tuition and course material fees.
Who is considered a dependent?
Claiming dependent allows you several tax-saving advantages. If you want to file your child on your tax return, they must meet the following basic qualifying child requirements:
- Must be aU.S. citizen, a U.S. resident alien, a U.S. national, or a resident of Canada or Mexico
- Must have a valid social security number
In addition to these rules, the IRS highlights five rules to determine if your dependent is a qualifying child and is eligible.
|Your biological child, stepchild, adopted child, or foster child
|Brother, sister, step-brother, or step-sister
|Grandchild, niece, or nephew
|Your child must be younger than 19 at the end of the tax year.
|Your child must be a full-time student for more than five months of the tax year and younger than 24.
|Your child must be permanently disabled at any age.
|Your child must have lived with you for more than half of the tax year at the location where you regularly live.
|Joint return test
|Your child must have filed a joint return with another person unless they’re getting a tax refund on tax withheld from their paycheck.
|Your child must receive more than half of their financial support from you.
If you still aren’t sure whether your child qualifies, check out the IRS’s qualifying child flow chart
(which we’ve recreated below) to see if your child is eligible to be included in your tax return.
Helping your child file their taxes
Your child getting their first paycheck is an exciting milestone. However, if they expect to earn more than the standard deduction, it’s wise to get a head start on teaching them about filing taxes.
It’s your child’s responsibility to file and sign their income tax returns. If your child neglects to file their taxes, they could be charged for tax evasion
or have to pay a hefty fine for back taxes
For further resources, the IRS offers educational content
to help your child learn about the how, what, and whys of taxes. Additionally, the IRS provides interactive activities
and simulations to allow your child to practice when filing their tax returns.
Will my minor child’s income affect my taxes?
Generally, no. Your minor child’s income won’t affect your taxes. If your child is single, under 65, not blind, and earned more than $13,850, they’ll have to file a separate tax return. However, you may elect to claim your child’s unearned income if you meet certain conditions.
Do I have to include my dependents’ income on my tax return?
No, you don’t have to include your dependents’ income on your tax return. However, having dependents may qualify you for tax-saving advantages such as tax deductions and credits. Your child must meet specific requirements to be eligible for dependency status.
How much money can a child make and still be claimed as a dependent?
It depends. If your child is single, under 65, not blind, and only makes earned income, they must earn less than $13,850 to qualify for dependency. If the child is under 65, not blind, and only makes unearned income, then they must earn less than $1,250.
Now, if your child makes both earned and unearned income, their gross income must be less than $13,850 or their earned income plus $400, whichever is lower.
Do I need my child’s W-2 on my tax return?
No, if your child makes less than $13,850 in wages, salary, and tips, they don’t need to file a separate tax return. However, if your child makes more, they must file their own tax return.
Can I claim my child if they work?
Yes, you can still claim your child if they work as long as they meet the citizenship, residency, age, relationship, and joint tax return test.
Do I need to report my child’s 1099 INT on my return?
No. If your child’s income is less than $1,250 in interest, dividend income, and capital gain distributions, they don’t need to file a tax return. However, you can elect to include your child’s unearned income on your own tax return.
- Generally, you cannot claim your child’s income on your tax return. However, there are some instances where you can.
- Whether your child has to file a tax return depends on how much they make in earned and/or unearned income.
- There are different tax return requirements for self-employed taxpayers or those earning income from a qualified church-controlled organization.
- Claiming a dependent can have many tax benefits. That said, your child must meet specific IRS requirements to qualify for dependency status.
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