What Is Tax Form 8615 & The “Kiddie” Tax? Here’s How It Works
If you have children who are receiving funds from various sources, you might be wondering if it’s worth bringing it to your tax person’s attention. You may be right, but only under specific circumstances. Learn all about Tax Form 8615 and the “kiddie tax” before scheduling a consultation with A. Roberts & Associates!
Your Quick Guide On Tax Form 8615
Tax Form 8615 is what you’ll need to fill out if your child exceeds the threshold in unearned income. You’re already familiar with the “earned” income that you receive as a working employee, but this is different. Unearned income is what you receive from passive sources like investments. Examples of unearned income include:
- Dividends
- Capital gains
- Interest
- Royalties
- Scholarships
- Rent
These types of funds are a great way for children to set up a bright future with money to start them off on the right track as they get older. But of course, substantial sums of cash will need to be taxed all the same, regardless of the recipient’s age.
| Is Tax Form 8615 The Same As “Kiddie Tax”? If you’ve ever heard the term “kiddie tax”, it basically refers to Tax Form 8615. It’s nicknamed kiddie tax because the form was created in order to prevent parents (or guardians) from using their children as a way to avoid paying taxes. Some of them would try to “gift” their income to their kids believing that those funds would be protected from being taxed. Learn more about taxes on monetary gifts. |
When Do I Need To Fill Out Tax Form 8615?
The qualifications for Tax Form 8615 are based on two factors: the child’s age and the amount of unearned income received. Although the form involves the child’s unearned income, the parent or guardian is responsible for including the form in their own tax return since the minor isn’t old enough to file or they’re still considered a dependent (and a full-time student).
How To Calculate Your Child’s Unearned Income
The unearned income threshold for Tax Form 8615 can change with each passing year. For 2022, those limits were $1,100, $2,300, and $12,750 respectively. When it comes to taxes, limits, and brackets tend to show a rising pattern, and the same is proven in this case:
For 2023, any unearned income below $1,250 doesn’t need to be recorded via Tax Form 8615. Any unearned income after $1,250 up to $2,500 needs to be recorded and will be taxed at the child’s income tax rate. After that, any unearned income that exceeds $2,500 will be taxed at the marginal rate of the parent or guardian filing.
| Did You Know? Tax Form 8615 (or the “kiddie tax”) used to only apply to children 14 and younger. This was because they were not yet old enough to legally work and receive earned income. |
Tax Preparedness – What To Expect When Filing Tax Form 8615
If you know that you’ll need to fill out Tax Form 8615 for your child, here is a list of things that you should have on hand:
- The names of the sources of income.
- A list of each value to be itemized.
- Any expenses made relating to these sources.
- Reports of any capital losses sustained.
- The name, address, and SSN of the child and the tax filer.
- The tax ID of the parent or guardian who’s filing.
Let A. Roberts & Associates Help You Navigate Your “Kiddie Tax”
For assistance in filling out Tax Form 8615 and to better secure your child’s future, reach out to A. Roberts & Associates to schedule a consultation with our tax professionals! Our business is all about helping you make the most of your earnings, and we have the expertise to give you the assistance you need to thrive.