Words you may need to know (see Glossary)
- Adjusted gross income
- Adjustments to income
- Alternative minimum tax
- Capital gain distribution
- Earned income
- Full-time student
- Gross income
- Investment income
- Itemized deductions
- Net capital gain
- Net investment income
- Qualified dividends
- Standard deduction
- Tax year
- Taxable income
- Unearned income
- Unrecaptured section 1250 gain
- 28% rate gain
The two rules that follow may affect the tax on the investment income of certain children.
- If the child's interest and dividend income (including capital gain distributions) total less than $9,500, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. (See Parent's Election To Report Child's Interest and Dividends, later.)
- If the child's interest, dividends, and other investment income total more than $1,900, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. (See Tax for Certain Children Who Have Investment Income of More Than $1,900, later.)
For these rules, the term "child" includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent.
These rules do not apply if neither of the child's parents were living at the end of the year.taxmap/pubs/p929-007.htm#en_us_publink1000203792
If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's investment income. The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Investment Income of More Than $1,900.taxmap/pubs/p929-007.htm#en_us_publink1000203793
For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax.
Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends. taxmap/pubs/p929-007.htm#en_us_publink1000203794
If the child's parents file separate returns, use the return of the parent with the greater taxable income. taxmap/pubs/p929-007.htm#en_us_publink1000203795
If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income.
For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501.taxmap/pubs/p929-007.htm#en_us_publink1000203796
If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. taxmap/pubs/p929-007.htm#en_us_publink1000203797
If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Do not use the return of the noncustodial parent.
If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. taxmap/pubs/p929-007.htm#en_us_publink1000203798
If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. taxmap/pubs/p929-007.htm#en_us_publink1000203799
If a widow or widower remarries, the new spouse is treated as the child's other parent. The rules explained earlier under Custodial parent remarried apply.