Little Timmy’s investments actually paid off? Congrats! Here’s how to put your kiddo’s income on your joint tax return.
Are you the custodial parent of a full-time student who’s also a child actor or an investment whiz? Is your child earning major passive income and unsure of your tax filing requirements?
Form 8814, Parent’s Election to Report Child’s Interest and Dividends, is a helpful tool that can assist you in making sure you are compliant with all applicable IRS regulations. Normally it’s the custodial parent who has to make tax payments based on their investment income, not the child. For federal income tax purposes, you may get a more favorable tax rate by bringing what your child earns into your joint tax return.
About Form 8814: Reporting a Child’s Interest and Dividends
Form 8814, Parent’s Election to Report Child’s Interest and Dividends, is an IRS form used by parents of full-time students under age 18 or younger with investment income to report that income on their own federal income tax returns. This form allows parents to include their child’s income in their own joint return and avoid the need for the student to file a separate return. It’s handy especially if the student is earning capital gain distributions from a taxable scholarship or the Alaska Permanent Fund.
Why file a separate tax return (and face any rules for children and taxes) when you could file a simple joint return as a family? Form 8814 is an option for parents to report interest and dividend income from private activity bonds and qualified dividends as well as any annuity income or capital gain distributions that their children earned. They must also calculate the taxable amount of unearned income in excess of $2,100, taking into account itemized deductions or standard deduction applied to the source of this income.
Generally, tax rates are more favorable when they’re on a joint tax return instead of a separate return. However, make sure you check with a tax professional to be sure you’re filing the correct tax return and listing all the necessary income for purposes of minimizing your tax liability.
It is important for parents to note that, according to the instructions for Form 8814, this form does not cover all types of income. For instance, any taxable income in excess of $2,100 received from sources other than investments and certain tax-exempt interest must be reported on a separate tax return for the child. Additionally, any earned income (such as wages) must also be reported on a separate return regardless of the amount earned.
What are the differences between Form 8814 and Form 8615?
Form 8814 and Form 8615 are both forms used by parents when filing a joint return with their child’s investment income. Form 8814 allows parents to report the child’s unearned income, such as dividends and capital gains, on their own tax returns. On the other hand, Form 8615 is used to calculate the tax owed on the child’s investment income and to report that tax on the child’s own tax return.
Itemizing Deductions on Form 8814
Itemizing deductions on Form 8814 can be a great way for parents of full-time students to reduce the overall tax burden on their returns. When filing taxes, parents must report any investment income exceeding $1,200 on Form 8814. By itemizing deductions on this form, parents can claim certain expenses they have paid throughout the year as a deduction against their taxable income. This can include tuition, student loan interest payments and other educational related expenses. Additionally, parents may also be able to deduct any state or local taxes they have paid during the year, as well as certain miscellaneous items such as job related expenses or charitable contributions.
IRS Requirements For Children With Investment Income Over $2,100
If your child has investment income over $2,100 in a year, good job! The Internal Revenue Service (IRS) requires that the parent or guardian of the child file Form 8814. In addition to filing Form 8814, parents also need to make estimated tax payments on behalf of their children if they owe any tax liability due to their unearned income. Their investment income essentially follows the same unearned income tax rules that you would follow as an individual filer. (For more capital gains info, we have an article about whether capital gains count as income.)
For example, if your child receives annuity income or other types of unearned income exceeding $2,200 then they may be required to file a separate tax return from yours.
Children with unearned income may be subject to special rules and regulations when it comes to taxation. The IRS requires that parents of a child under the age of 19 (or 24 for full-time students) who have investment income in excess of $2,200 must file a separate tax return using Form 8814. This form is used to report dividends, capital gain distributions, and other types of investment income. Furthermore, the child cannot claim any itemized deductions or the standard deduction on their separate tax return; instead, all items must be reported as income.
Additionally, any dividend income attributable to the child will be taxed at the parent’s marginal rate regardless of whether or not the parent claims it on their own returns. Finally, any taxable income earned by the child over $12,400 will be taxed at their own rate rather than at their parent’s tax rate.
Taxpayers can use Form 8814 to report dividends and other types of unearned income when filing a separate return. Whether to itemize or take the standard deduction is another important consideration for calculating tax liability from dividend income and long-term capital gains.
When It Makes Sense (and Doesn’t) to Use Form 8814
Form 8814 can definitely simplify tax season for parents, but it’s not always the right call. The biggest reason someone might use it is convenience. If your child only earned a small amount in interest or dividends (maybe from a savings account or a small custodial investment account) then reporting that income on your return can save time and paperwork. It also avoids the hassle of filing a separate return for your child, which might feel like overkill for just a few hundred bucks.
That said, there are downsides. A portion of your child’s income will be taxed at your rate, not theirs, and if your rate is significantly higher, you could end up paying more in taxes than if they’d filed on their own. Also, reporting their income on your return can increase your adjusted gross income, which may affect other credits or deductions you’re eligible for, including the child tax credit or education-related benefits. So, while Form 8814 is often the easier route, it’s not always the cheaper one.
How to Actually Fill Out Form 8814
Filling out Form 8814 isn’t too complicated once you understand what the IRS is asking for. You’ll start by listing your child’s name and Social Security number. After that, you report their total interest and dividend income, but only if it meets the criteria. For example, it has to be reported on a Form 1099-INT or 1099-DIV, and it must be the child’s only income.
Then you walk through a few calculations. You’ll figure out how much of the child’s income qualifies to be taxed at your rate and how much, if any, is subject to the Kiddie Tax rules. Once all the math is done, the result gets added to your total income on your 1040. You also need to include the form itself when you file your return. If you’re using tax software, it’ll usually guide you through this process and attach Form 8814 automatically if you choose this filing option.
1. What exactly does Form 8814 do, and when would I use it? Form 8814 lets you include your child’s interest and dividend income on your tax return instead of them filing separately. It’s mostly about convenience. If your child received income only from things like bank interest or stock dividends and the total was under the IRS limit for the year, you might choose this option just to keep your tax filing process simpler. It avoids having to deal with a separate return for your child, which can be a hassle for a relatively small amount of income.
2. What kinds of income qualify for Form 8814 reporting? The income has to be unearned, which means it didn’t come from wages or self-employment. We’re talking about income like dividends, interest, capital gains distributions, or certain U.S. savings bond interest. If your child made money mowing lawns or working part-time, that income isn’t eligible for Form 8814. Only passive income qualifies. Also, the total unearned income has to fall under the IRS limit, which is adjusted slightly each year. For 2025, it’s likely to be just above $12,500 based on recent inflation updates.
3. Are there any downsides to using Form 8814? There can be. While it seems easier to report your child’s income on your own return, the trade-off is that some of it may be taxed at your rate rather than your child’s lower rate. This is because of what’s known as the Kiddie Tax. A portion of the child’s income gets added to your own, and that could increase your total tax bill. Plus, reporting their income on your return might reduce your eligibility for certain credits or deductions. That’s why it’s smart to compare the tax outcome of using Form 8814 with the alternative of filing a separate return for your child.
4. What are the eligibility rules to use Form 8814? Your child must be under age 19 at the end of the year, or under age 24 if they’re a full-time student. They have to be required to file a tax return only because of their unearned income, not because of any wages. They also can’t have made any estimated tax payments, nor have had any federal income tax withheld unless it was reported on Form 1099-INT or 1099-DIV. If they meet all these conditions, and their total unearned income stays within the allowed limit, you can usually opt to use Form 8814. But if even one of those conditions isn’t met, a separate tax return will be required for the child.
5. Can I use Form 8814 for more than one child? Yes, but you’ll need to fill out a separate Form 8814 for each eligible child. The IRS requires a separate breakdown for each child’s unearned income, even though everything is still being reported on your own tax return. If you’ve got multiple kids with small investment accounts, this could be a time-saver compared to filing a bunch of individual returns. Just keep in mind that each child’s income is still considered separately when determining how much is taxable and what portion may be added to your income.
6. How does using Form 8814 affect college savings or financial aid applications? Reporting your child’s income on your own return might make it look like you have more income than you really do, especially from the perspective of financial aid formulas. On the FAFSA, for instance, parental income is a major factor, and including your child’s investment earnings there could reduce the amount of aid you qualify for. This isn’t always a huge issue, especially if the child’s income is small, but it’s something to be aware of. If you’re planning ahead for college, you might want to weigh the benefits of using Form 8814 against the possible impact on financial aid.
Sarah Nieschalk
Sarah E. Deierlein Nieschalk, EA, is an experienced tax professional with over a decade of expertise representing taxpayers before the IRS. As an Enrolled Agent and Assistant Vice President of Servicing at Community Tax, LLC, Sarah specializes in resolving complex federal and state tax collection issues, including high-dollar individual liabilities, employment tax challenges, and corporate audits. Since becoming an Enrolled Agent in 2012, she has resolved over 5,000 cases, saving millions for clients while protecting countless businesses. Outside of work, Sarah enjoys painting, staying active, and raising her family of rescued dogs while contributing to nonprofit causes through storytelling events.
