Special tax rules apply with certain children with investment income. Those rules may affect the tax rate and the way you report the income. If a child can’t file his or her own return, their parent or guardian is normally responsible for filing their tax return. Here are a few central facts that you should know about your child’s investment income.
- Investment income usually includes interest, dividends and capital gains. It also includes other unearned income, such as capital gains. It also includes other unearned income, such as from a trust.
- Special rules apply if your child’s total investment income is more than $2,000. Your tax rate may apply to part of that income instead of your child’s tax rate.
- If your child’s total interest and dividend income was less than $10,000 in 2013, you may be able to include the income on your tax return.
- Children whose investment income was $10,000 or more in 2013 must file their own tax return. Starting in 2013, a child filing a tax return might be subject the Net Investment Income Tax (NIIT) which is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount.
To figure whether your child must file a tax return or include your child’s income to your return, please call or send an e-mail to Westmusa.