Do Minors Have to Pay Income Tax?

2015 - IRS Rules for Tax Payments by and on Behalf of Minors

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Is your minor earning interest and dividends from investments you have under his name? Find out when minors need to pay income tax and how to file a tax return for a minor child.

2015 Tax Year Income Requirements for Minors:

For the 2015 tax year, which is filed in 2016, 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 $1050. It includes the dividends and interest on savings accounts or investments in the minor child's name.
  • Earned income is greater than $6,300. This includes the money your minor earns at a part-time job.
  • Self-employment net earnings are greater than $400.
  • Earned and unearned total income is greater than the larger of $1050 or earned income plus $300.

Note that the above is a synopsis of the IRS rules that apply. There are numerous exceptions to these rules -- if the child is blind, for instance -- 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. Either a thorough reading of this document or consultation with your tax advisor is recommended.  

How to File a Tax Return for a Minor

There are two ways you file an income tax return for a minor child, depending on how he or she earned 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 his return. He 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 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 children, 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 for tax time. In addition, have them help, by gathering their paychecks and adding up how much withholding they had. Show them where you enter the numbers on the tax forms to introduce your kids to taxes.

Optional Tax Filing for Minors:

Even if your minor is not required to file an income tax return, he can choose to file one. He may want to do this if he had withheld from a part-time job and wants to get a refund.