What Every Parent Should Know about Child's Investment Income
Children with investment income may have part or all of this income taxed at
their parent’s tax rate rather than at the child’s rate. Investment income
includes interest, dividends, capital gains and other unearned income.
This rule applies to children who have investment income of more than $1800
and meet one of three age requirements for 2008:
- The child is younger than 18.
- The child is 18 and has earned income that does not exceed one-half of
their own support for the year.
- The child is older than 18 and younger than 24 and a full-time student
with earned income that does not exceed one-half of the child’s support for the
To figure the child's tax using this method, fill out Form 8615, Tax for
Certain Children Who Have Investment Income of More Than $1,800, and attach it
to the child's federal income tax return.
When certain conditions are met, a parent may be able to avoid having to file
a tax return for the child by including the child’s income on the parent’s tax
return. In this situation, the parent would file Form 8814, Parents' Election To
Report Child's Interest and Dividends.