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previous page Previous Page: Publication 17 - Your Federal Income Tax - Tax on Investment Income of Certain Children
next page Next Page: Publication 17 - Your Federal Income Tax - Tax for Certain Children Who Have Investment Income of More Than $1,800
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pub17/p17-167.htm#en_us_publink100034772

Parent's Election 
To Report Child's 
Interest and Dividends(p208)


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previous topic occurrence Parent's Election To Report Child's Interest and Dividends next topic occurrence

You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. If you do, your child will not have to file a return.
You can make this election only if all the following conditions are met. These conditions are also shown in Figure 31-A.
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Certain January 1 birthdays.(p208)


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A child born on January 1, 1990, is considered to be age 19 at the end of 2008. You cannot make this election for such a child unless the child was a full-time student.
A child born on January 1, 1985, is considered to be age 24 at the end of 2008. You cannot make this election for such a child.
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Full-time student.(p208)


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previous topic occurrence Full-time student. next topic occurrence

A full-time student is a child who during any part of 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.
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How to make the election.(p208)


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Make the election by attaching Form 8814 to your Form 1040. (If you make this election, you cannot file Form 1040A or Form 1040EZ.) Attach a separate Form 8814 for each child for whom you make the election. You can make the election for one or more children and not for others.
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Effect of Making the Election(p209)


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The federal income tax on your child's income may be more if you make the Form 8814 election.
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Rate may be higher.(p209)


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If your child received qualified dividends or capital gain distributions, you may pay up to $90 more tax if you make this election instead of filing a separate tax return for the child. This is because the tax rate on the child's income between $900 and $1,800 is 10% if you make this election. However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions.
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Deductions you cannot take.(p209)


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Deductions you cannot take.

By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return.
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Reduced deductions or credits.(p209)


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Reduced deductions or credits.

If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following.
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Penalty for underpayment of estimated tax.(p209)


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previous topic occurrence Penalty for Underpayment next topic occurrence

If you make this election for 2008 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. If you plan to make this election for 2009, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. See chapter 4 for more information.
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Figuring Child's Income(p209)


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previous topic occurrence Tax on investment income of a child under age 18. next topic occurrence

Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Only the amount over $1,800 is added to your income. The amount over $1,800 is shown on Form 8814, line 6. Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Include the amount from Form 8814, line 12, on Form 1040, line 21. Enter "Form 8814" on the dotted line next to line 21. If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21.
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Capital gain distributions and qualified dividends.(p210)


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Capital gain distributions and qualified dividends.

If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Part 2 of Publication 929. If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Part 2 of Publication 929.
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Figuring Additional Tax(p210)


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previous topic occurrence Tax on investment income of a child under age 18. next topic occurrence

Use Form 8814, Part II, to figure the tax on the $1,800 of your child's interest and dividends that you do not include in your income. This tax is added to the tax figured on your income.
This additional tax is the smaller of:
  1. 10% × (your child's gross income − $900), or
  2. $90.
Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Check box a on Form 1040, line 44.
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Illustrated Example(p210)


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David and Linda Parks are married and will file separate tax returns for 2008. Their only child, Philip, is 8. Philip received a Form 1099-INT showing $1,650 taxable interest income and a Form 1099-DIV showing $1,150 ordinary dividends. All the dividends were qualified dividends. His parents decide to include that income on one of their returns so they will not have to file a return for Philip.
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First, David and Linda each figure their taxable income (Form 1040, line 43) without regard to Philip's income. David's taxable income is $56,700 and Linda's is $74,300. Because her taxable income is greater, Linda can elect to include Philip's income on her return. See Which Parent's Return To Use, earlier.
On Form 8814 (see illustrated form), Linda enters her name and social security number, then Philip's name and social security number. She enters Philip's taxable interest income, $1,650, on line 1a. Philip had no tax-exempt interest income, so she leaves line 1b blank. She enters Philip's ordinary dividends, $1,150, on line 2a. All of Philip's ordinary dividends were qualified dividends, so Linda also enters $1,150 on line 2b. Philip did not have any capital gain distributions, so she leaves line 3 blank.
Linda adds lines 1a and 2a and enters the result, $2,800, on line 4. Because Philip had qualified dividends, Linda must complete lines 7 through 11 of Form 8814. She includes the amount from line 9 of Form 8814 ($411) on lines 9a and 9b of her Form 1040. On the dotted lines next to lines 9a and 9b, she enters "Form 8814–$411."
Linda includes $589 in the total on line 21 of her Form 1040 (not illustrated) and in the space next to that line writes "Form 8814–$589." Adding that amount, plus the $411 of qualified dividends, to her income increases each of the amounts on lines 22, 37, 38, 41, and 43 of her Form 1040 by $1,000. Linda is not claiming any deductions that are affected by the increase to her income. Therefore, her revised taxable income on line 43 is $75,300 ($74,300 + $411 + $589).
On Form 8814, Linda subtracts the $900 shown on line 13 from the $2,800 on line 4 and enters the result, $1,900, on line 14. Because that amount is not less than $900, she enters $90 on line 15. This is the tax on the first $1,800 of Philip's income, which Linda did not have to add to her income. She must add this additional tax to the tax figured on her revised taxable income.
The tax on her $75,300 revised taxable income, figured using the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions, is $15,399. She adds $90, and enters the $15,489 total on Form 1040, line 44, and checks box a.
Linda attaches Form 8814 to her Form 1040.