Filing Tax Returns for Minor Children

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Is your minor child earning interest and dividends from investments you have under his or her name? Or perhaps your minor child is working part-time over the summer as a waiter. Minors (even toddlers) need to pay income tax, and you, as the parent, need to know how to file a tax return for your under-age child.

Age for Filing Income Tax

First, children are never too young nor too old to file income taxes if they have earned income or income from savings or investments.

Their age doesn't matter; the amount they earn is what matters. A toddler with a savings account funded by doting grandparents may need to file for income tax, while a teenager working at odd jobs may not.

Dependent Children

Your dependent children must submit tax returns if they earn certain amounts of income during the year. Different filing rules apply to children, and even small amounts of income may require a return.

You must ensure that your child is eligible to be your dependent; otherwise, their obligation to file a tax return is the same as adults. The tax rules allow you to claim a dependency exemption for a child if they reside with you for more than half the year, don’t provide more than half of their own financial support, and are under the age of 19 at all times during the tax year, or under 24 if a full-time student.

If your adult child lives outside of the home because of educational obligations, you may still claim the exemption even though the child does not physically live with you during the year.

2017 Tax Year Income Requirements for Minors

For the 2017 tax year, which is filed by the April 17, 2018, deadline, minor children claimed as a dependent on your tax return must file their taxes—that is, you must file on their behalf—if they meet any of the following conditions:

  • Unearned income is greater than $1,050. This includes the dividends and interest on savings accounts or investments in the minor child's name.
  • Earned income is greater than $6,350. This includes the money your minor earns at a part-time job.
  • Self-employment net earnings that are greater than $400.
  • Earned and unearned total income that is greater than the larger of $1,050 or earned income plus $350.

Note that the above is a synopsis of the IRS rules that apply. There are numerous exceptions to these rules. For example, if your child is blind. So, while the above is a reliable summary of the rules that apply, your child's requirements may differ. IRS Publication 929, "Tax Rules for Children and Dependents," goes into these somewhat complex rules in detail. Therefore, either a thorough reading of this document or consultation with your tax adviser is highly recommended.  

How to File a Tax Return for a Minor

There are two ways to file an income tax return for a minor child, depending on how he or she earned their money.

  • Attach to parent's return: If your minor is under age 19 (or a full-time student under 24), and the child's income is less than $1,500, and only from interest and dividends, it can be attached to the parent's return using Form 8814. Note also that while reporting the child's income as an attachment on your return is an easy way to file, it can result in higher taxes on qualified dividends or capital gains.
  • Complete individual tax return for the minor: If the requirements are not met to attach it to the parent's return, or you want to ensure lower taxes, your minor child should file a return. He or she can file a simple return for free at CompleteTax. Also, see below "Optional Tax Filing for Minors."

Kiddie Tax for Minors

Although dependent children (under 19 years old or a full-time student under 24) pay no taxes on the first $1,050 of unearned income, they are taxed at their rate for the next $1,050. If investment income totals more than $2,100, part of your minor's income will be taxed at the parent's tax rate instead of at what would otherwise be the child's tax rate. It is the kiddie tax, which exists to make sure that the government is not losing tax revenue when parents shift income to their minor children.

Other Filing Requirements for Minors

In addition to the income requirements, there are other circumstances when minors must file an income tax return. One example is the tax on Social Security and Medicare uncollected by an employer. Again, to understand all the requirements, see Publication 929.  

Teaching Kids About Taxes

When you are working on filing taxes for your minor child, it's a great opportunity to teach them about taxes. If they have a job, explain to them that their employer will withhold taxes from their paycheck and give them a folder to save their paycheck stubs so they have them at tax time.

In addition, have them help with the process by gathering their paychecks and adding up how much withholding they had. You should also show them where to enter the numbers on the tax forms. This exercise will help introduce your minor child to the world of taxes and tax returns.

Optional Tax Filing for Minors

Even a minor who is not required to file an income tax return can choose to file one. Minors will want to do this if they had taxes withheld from a part-time job and they want to get a refund.