IRS Form 8814: What Is It & Who Is Required To File?
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Summary:
IRS Form 8814 allows parents to pay a “kiddie tax” on behalf of their children who have unearned income from dividends or interest, including capital gain distributions. To qualify to use this form, the child must be under 19 years old or under 24 years old and a full-time student. If the child has more than $11,500 in unearned income, then they will have to fill out a different form and report the income on their own tax return.
When many parents file their tax returns, they list their children as dependents, and that’s the end of the story. The parents earned all the income, so they file their own tax returns and perhaps even get a tax credit for the child. However, in some cases, children can have assets under their names that produce investment income.
If a child has unearned income from these assets, then there are two options for paying the taxes they owe. Either the child files their own tax return, or the parents save them the hassle of filing by using Form 8814 to report that income on their tax return. If your child has unearned income to report, keep reading to learn how and when to use Form 8814.
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About Form 8814
IRS Form 8814 is used by parents to report their children’s unearned income (one form per child) on their taxes in any amount under $11,500 (for tax year 2022). If the unearned income is greater than $11,500, then the child must fill out a tax return themselves. That form is called Form 8615. Many parents whose children have less than $11,500 in unearned income range will choose to fill out Form 8814 and file taxes on behalf of those children. Thus, they pay the “kiddie tax,” and the kids don’t have to worry about filing a tax return.
Pro Tip
You may pay a little more tax if you elect to file Form 8814 instead of filing a separate tax return for your child. This is because the tax rate on the child’s income between $1,150 and $2,300 is 10% if you file an 8814. If the child files a return themselves, the rate could be as low as 0% due to the separate rules on dividends or capital gains distributions. (The first $1,150 is not taxed when using Form 8814.) If you need help comparing your options, you might want to speak with a tax professional.
What qualifies someone as a child?
To be considered a child in the eyes of the IRS, as well as qualify for Form 8814, the following requirements must be met:
- The child is under age 19.
- The child is 24 or under and is a full-time student.
- The child’s only income was from interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends.
- The child’s gross income was less than $11,500 (based on 2022 IRS rules).
- The child is required to file a return.
- The child does not file a joint return.
- There were no estimated tax payments for the child (including any overpayment of tax from his or her previous year’s return applied to this year’s estimated tax).
- There was no federal income tax withheld from the child’s income because of backup withholding rules.
What qualifies someone as a student?
A child can be 24 or younger and still qualify for Form 8814. However, the child needs to be a student, as defined below:
“A student is a child who, for some part of each of five calendar months during the year, was enrolled as a full-time student at a school or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.”
If the student earns money from working, the earned income needs to be less than half of all the money they receive, including support from parents for their living expenses.
Parents that qualify to use Form 8814
If you are a parent, you can fill out Form 8814 if:
- You are filing a joint return with the child’s other parent
- You and the child’s other parent were married to each other but filed separate returns, and you had the higher taxable income
- You were unmarried, treated as unmarried for federal income tax purposes, or separated from the child’s other parent by a divorce or separate maintenance decree. The child must have lived with you for most of the year (you were the custodial parent). If you were the custodial parent and you remarried, you could make the election on a joint return with your new spouse. But if you and your new spouse don’t file a joint return, you qualify to make the election only if you have higher taxable income than your new spouse.
You could have reduced deductions
Keep in mind that if you opt to use Form 8814, your adjusted gross income could increase and thus reduce certain deductions or credits, including:
- Deduction for contributions to a traditional IRA
- Deduction for student loan interest
- Itemized deductions for medical expenses and casualty and theft losses
- Credit for child and dependent care expenses
- Child tax credit
- Education tax credits
- Earned income credit
Get help filing your taxes
Ready to get started on your taxes? We have more information on filling out more forms, including 720, 8862, 1099-C, 5498, and 4868. Plus, you can find a tax preparation service that can help you make sense of all the paperwork.
FAQ
What is the difference between Forms 8814 and 8615?
The difference between 8814 and 8615 revolves around who files the taxes. With Form 8615, the child files the tax return. In the case of 8814, the parents report the child’s unearned income on their own tax return.
Can you report capital gains on Form 8814?
Yes, Form 8814 is mainly used for investment income in the form of dividends, interest, and capital gains.
Who must file 8814?
The parents or legal guardians of a child with unearned income must file Form 8814. However, the child’s unearned income needs to be less than $11,500 to qualify. If it exceeds that number, then the child must file Form 8615 with their own tax return.
Should I use Form 8814?
If your child qualifies, then you can use Form 8814, but you don’t have to use it. It’s possible that there could be a lower tax burden all around if your child files a tax return separately. If you are unsure of which method makes the most financial sense, you might want to seek help from a tax professional.
Key takeaways
- IRS Form 8814 allows tax filers to pay a “kiddie tax” on their child’s unearned income, so the child does not have to file a separate tax return.
- Form 8814 applies to a child’s unearned income in the form of investments, such as dividends, interest, and capital gains.
- A child must be under age 19 or under 24 and a full-time student to qualify. They must have less than $11,500 in unearned income.
- Form 8814 differs from Form 8615, which is for children to report unearned income when filing their own tax returns.
- You may want to speak to a tax professional to determine whether you will pay less by having the child file their own return, due to different tax rates.
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