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Interest income on a child's retrun

My childbride is on my case to file all returns by the end of February. This has to do with financial aid for my son going to college in the fall.

I am concerned that my tax guy will have a heart attack when he sees me in the same year a return is due. ;)

I decided to again file my son's return. I went through the papers and found he actually listen to me and filled out his W-4 so he had no taxes withheld.

But he has around $1200 in interest income. His total income is under $4000. Looks to me like there is no reason to file other than to have a return on record.

Dick

Reply to
Dick Adams
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If he is your dependent, he has to file as his unearned income is over $900. He gets no personal exemption and his std deduction is the lesser of $5450 or the sum of his earned income and $300.

Reply to
Alan

He would have to file even if his unearned income was under $900 but over $300.

To put another way, his std deduction is the greater of $900, or earned income plus $300. In this case, suppose the facts are:

interest = 1200 earned = 2800 total = 4000

std deduction = 2800 + 300 = 3100

taxable income = 4000 - 3100 = 900

so he must file and pay tax.

If his investment income tops $1800, some of it will probably be taxable on your return. Since he has other than just investment income, you cannot elect to report his interest on your return.

All assuming he is your dependent, of course.

-Mark Bole

Reply to
Mark Bole

Mark: You state that he has to file even if his unearned income is under $900 but over $300... but your example is Dick's given: Unearned income of $1200.

Filing for a dependent under age 65 is required if any of the following 3 tests are passed:

  1. Unearned income over 0. Dick's child met this rule. He must file.

  1. Earned income over 50. Child failed this rule.

  2. Gross income more than the LARGER of 0 or earned income up to 50 plus 0. Child passed this test. He must file.

So Dick's dependent must file because he passed at least one of the tests. I cited the first rule because it was the obvious one.

Reply to
Alan

Fortunately he can still use a Form 1040-EZ.

-Mark Bole

Reply to
Mark Bole

If the son's investment income is over $1,800, some of it will probably be taxable at Dick's tax rate, but not on Dick's return. The kiddie tax will have to be calculated on the child's return (using Form 8615). That also means that Dick would have to finish his own return in order to have the information needed for the kiddie tax calculation.

Bob Sandler

Reply to
Bob Sandler

Thanx for the correction. I'm always getting my 8814's and 8615's mixed up...

Usually the household is better off if the dependent files his own return when there are qualified dividends or capital gains distributions, some of which would get zero percent tax on the dependent's return this year (2008). You pretty much have to draft numbers both ways to see what is best in many cases.

-Mark Bole

Reply to
Mark Bole

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