Publication 17
taxmap/pub17/p17-162.htm#en_us_publink1000174280If a 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. If the parent does not or cannot choose to
include the child's income on the parent's return, use Form 8615 to figure the
child's tax. Attach the completed form to the child's Form 1040 or Form 1040A.
taxmap/pub17/p17-162.htm#en_us_publink1000174281Form 8615 must be filed for a child if all of the following statements
are true.
- The child's investment income was more than $1,900.
- The child is required to file a return for 2010.
- The child either:
- Was under age 18 at the end of the year,
- Was age 18 at the end of the year and did not have earned
income that was more than half of his or her support, or
- Was a full-time student over age 18 and under age 24 at
the end of the year and did not have earned income that was more than half of
his or her support.
- At least one of the child's parents was alive at the end of
2010.
- The child does not file a joint return for 2010.
These conditions are also shown in Figure
31-B.
Earned income includes wages, tips, and other payments received
for personal services performed. It does not include investment income as
defined later in this chapter.
taxmap/pub17/p17-162.htm#en_us_publink1000174283Your child's support includes all amounts spent to provide the
child with food, lodging, clothing, education, medical and dental care,
recreation, transportation, and similar necessities. To figure your child's
support, count support provided by you, your child, and others. However, a
scholarship received by your child is not considered support if your child is a
full-time student. See chapter 3 for details about support.
taxmap/pub17/p17-162.htm#en_us_publink1000174284Use the following chart to determine whether certain children
with January 1 birthdays meet condition 3 under
When Form 8615 must be filed.
| IF a child was born on... | THEN, at the end of 2010, the child is considered to be... |
|---|
| January 1, 1993 | 18* |
| January 1, 1992 | 19** |
| January 1, 1987 | 24*** |
*This child is not
under
age 18. The child meets condition 3 only if the child did not have earned income
that was more than half of the child's support.
**This child meets condition 3 only if the child was a full-time
student who did not have earned income that was more than half of the child's
support.
***Do not use Form 8615 for this child.
|
taxmap/pub17/p17-162.htm#en_us_publink1000174286On Form 8615, lines A and B, enter the parent's name and social
security number. (If the parents filed a joint return, enter the name and social
security number listed first on the joint return.) On line C, check the box for
the parent's filing status.
See
Which Parent's Return To Use
at the beginning of this chapter for information on which parent's return
information must be used on Form 8615.
If the parent and the child do not have the same tax year, complete
Form 8615 using the information on the parent's return for the tax year that
ends in the child's tax year.
taxmap/pub17/p17-162.htm#en_us_publink1000174291If the information needed from the parent's return is not known
by the time the child's return is due (usually April 15), you can file the
return using estimates.
You can use any reasonable estimate. This includes using information
from last year's return. If you use an estimated amount on Form 8615, enter
"Estimated" on the line next to the amount.
When you get the correct information, file an amended return on Form 1040X,
Amended U.S. Individual Income Tax Return.
Instead of using estimates, you can get an automatic 6-month
extension of time to file if, by the date your return is due, you file Form
4868, Application for Automatic Extension of Time To File U.S. Individual Income
Tax Return. Extensions are discussed in chapter 1.
taxmap/pub17/p17-162.htm#en_us_publink1000174292The first step in figuring a child's tax using Form 8615 is to
figure the child's net investment income. To do that, use Form 8615, Part I.
taxmap/pub17/p17-162.htm#en_us_publink1000174293If the child had no earned income, enter on this line the adjusted
gross income shown on the child's return. Adjusted gross income is shown on Form
1040, line 38, or Form 1040A, line 22. Form 1040EZ cannot be used if Form 8615
must be filed.
If the child had earned income, figure the amount to enter on
Form 8615, line 1, by using the worksheet in the instructions for the form.
However, if the child has excluded any foreign earned income
or deducted either a loss from self-employment or a net operating loss from
another year, use the Alternate Worksheet for Form 8615, Line 1, in Publication
929 to figure the amount to enter on Form 8615, line 1.
taxmap/pub17/p17-162.htm#en_us_publink1000174294Investment income is generally all income other than salaries,
wages, and other amounts received as pay for work actually done. It includes
taxable interest, dividends (including capital gain distributions), capital
gains, the taxable part of social security and pension payments, and certain
distributions from trusts. Investment income includes amounts produced by assets
the child obtained with earned income (such as interest on a savings account
into which the child deposited wages).
taxmap/pub17/p17-162.htm#en_us_publink1000174295For this purpose, investment income includes only amounts the
child must include in total income. Nontaxable investment income, such as
tax-exempt interest and the nontaxable part of social security and pension
payments, is not included.
taxmap/pub17/p17-162.htm#en_us_publink1000174296A child's investment income includes all income produced by property
belonging to the child. This is true even if the property was transferred to the
child, regardless of when the property was transferred or purchased or who
transferred it.
A child's investment income includes income produced by property
given as a gift to the child. This includes gifts to the child from grandparents
or any other person and gifts made under the Uniform Gift to Minors Act.
taxmap/pub17/p17-162.htm#en_us_publink1000174297Amanda Black, age 13, received the following income.
- Dividends — $600
- Wages — $2,100
- Taxable interest — $1,200
- Tax-exempt interest — $100
- Net capital gains — $100
The dividends were qualified dividends on stock given to her
by her grandparents.
Amanda's investment income is $1,900. This is the total of the
dividends ($600), taxable interest ($1,200), and net capital gains ($100). Her
wages are earned (not investment) income because they are received for work
actually done. Her tax-exempt interest is not included because it is nontaxable.
taxmap/pub17/p17-162.htm#en_us_publink1000174298If a child is the beneficiary of a trust, distributions of taxable
interest, dividends, capital gains, and other investment income from the trust
are investment income to the child.
However, for purposes of completing Form 8615, a taxable distribution
from a qualified disability trust is considered earned income, not investment
income.
taxmap/pub17/p17-162.htm#en_us_publink1000174299If the child does not itemize deductions on Schedule A (Form
1040), enter $1,900 on line 2.
If the child does itemize deductions, enter on line 2 the larger
of:
- $950 plus the portion of the child's itemized deductions on
Schedule A (Form 1040), line 29, that are directly connected with the production
of investment income entered on line 1, or
- $1,900.
Itemized deductions are directly connected with the production
of investment income if they are for expenses paid to produce or collect taxable
income or to manage, conserve, or maintain property held for producing income.
These expenses include custodian fees and service charges, service fees to
collect taxable interest and dividends, and certain investment counsel fees.
These expenses are added to certain other miscellaneous itemized
deductions on Schedule A (Form 1040). Only the amount greater than 2% of the
child's adjusted gross income can be deducted. See
chapter 28 for more information.
Roger, age 12, has investment income of $8,000, no other income,
no adjustments to income, and itemized deductions of $300 (net of the 2% limit)
that are directly connected with his investment income. His adjusted gross
income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line
1. Line 2 is $1,900 because that is more than the sum of $950 and his
directly-connected itemized deductions of $300.
taxmap/pub17/p17-162.htm#en_us_publink1000174303Eleanor, age 8, has investment income of $16,000 and an early
withdrawal penalty of $100. She has no other income. She has itemized deductions
of $1,050 (net of the 2% limit) that are directly connected with the production
of her investment income. Her adjusted gross income, entered on line 1, is
$15,900 ($16,000 − $100). The amount on line 2 is $2,000. This is the
larger of:
- $950 plus the $1,050 of directly connected itemized deductions,
or
- $1,900.
Subtract line 2 from line 1 and enter the result on this line.
If zero or less, do not complete the rest of the form. However, you must still
attach Form 8615 to the child's tax return. Figure the tax on the child's
taxable income in the normal manner.
taxmap/pub17/p17-162.htm#en_us_publink1000174305Enter on line 4 the child's taxable income from Form 1040, line
43, or Form 1040A, line 27.
However, if the child files Form 2555 or 2555-EZ to claim the
foreign earned income exclusion or housing exclusion, see the Form 8615
instructions.
taxmap/pub17/p17-162.htm#en_us_publink1000174306A child's net investment income cannot be more than his or her
taxable income. Enter on Form 8615, line 5, the smaller of line 3 or line 4.
This is the child's net investment income.
If zero or less, do not complete the rest of the form. However,
you must still attach Form 8615 to the child's tax return. Figure the tax on the
child's taxable income in the normal manner.
taxmap/pub17/p17-162.htm#en_us_publink1000174307The next step in completing Form 8615 is to figure a tentative
tax on the child's net investment income at the parent's tax rate. The tentative
tax at the parent's tax rate is the difference between the tax on the parent's
taxable income figured with the child's net investment income (plus the net
investment income of any other child whose Form 8615 includes the tax return
information of that parent) and the tax figured without it.
When figuring the tentative tax at the parent's tax rate, do
not refigure any of the exclusions, deductions, or credits on the parent's
return because of the child's net investment income. For example, do not
refigure the medical expense deduction.
Figure the tentative tax on Form 8615, lines 6 through 13.
Note.If the child or parent has any capital gains or losses, get
Publication 929 for help in completing Form 8615, Part II.
taxmap/pub17/p17-162.htm#en_us_publink1000190860Enter on line 6 the parent's taxable income from Form 1040, line
43, or Form 1040A, line 27.
If the Foreign Earned Income Tax Worksheet (in the Form 1040
instructions) was used to figure the parent's tax, enter the amount from line 3
of that worksheet instead of the parent's taxable income.
taxmap/pub17/p17-162.htm#en_us_publink1000174309If the tax return information of the parent is also used on any
other child's Form 8615, enter on line 7 the total of the amounts from line 5 of
all the other children's Forms 8615. Do not include the amount from line 5 of
the Form 8615 being completed.
taxmap/pub17/p17-162.htm#en_us_publink1000174310Paul and Jane Persimmon have three children, Sharon, Jerry, and
Mike, who must attach Form 8615 to their tax returns. The children's net
investment income amounts on line 5 of their Forms 8615 are:
- Sharon — $800
- Jerry — $600
- Mike — $1,000
Line 7 of Sharon's Form 8615 will show $1,600, the total of the
amounts on line 5 of Jerry's and Mike's Forms 8615.
Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000).
Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600).
taxmap/pub17/p17-162.htm#en_us_publink1000174311If the net investment income of the other children is not available
when the return is due, either file the return using estimates or get an
extension of time to file. See
Parent's return information not known timely, earlier.
Subtract line 10 from line 9 and enter the result on this line.
This is the tentative tax.
If line 7 is blank, skip lines 12a and 12b and enter the amount
from line 11 on line 13. Also skip the discussion for lines 12a and 12b that
follows.
taxmap/pub17/p17-162.htm#en_us_publink1000174314If an amount is entered on line 7, divide the tentative tax shown
on line 11 among the children according to each child's share of the total net
investment income. This is done on lines 12a, 12b, and 13. Add the amount on
line 7 to the amount on line 5 and enter the total on line 12a. Divide the
amount on line 5 by the amount on line 12a and enter the result, as a decimal,
on line 12b.
taxmap/pub17/p17-162.htm#en_us_publink1000174315In the earlier example under
Line 7 (net investment income of other children),
Sharon's Form 8615 shows $1,600 on line 7. The amount entered
on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 +
$1,600). The decimal on line 12b is .333, figured as follows and rounded to
three places.
The final step in figuring a child's tax using Form 8615 is to
determine the larger of:
- The total of:
- The child's share of the tentative tax based on the parent's
tax rate, plus
- The tax on the child's taxable income in excess of net investment
income, figured at the child's tax rate, or
- The tax on the child's taxable income, figured at the child's
tax rate.
This is the child's tax. It is figured on Form 8615, lines 14
through 18.
taxmap/pub17/p17-162.htm#en_us_publink1000174318A child may be subject to alternative minimum tax (AMT) if he
or she has certain items given preferential treatment under the tax law. See
Alternative Minimum Tax in chapter 30.
For more information on who is liable for AMT and how to figure it, see Form
6251, Alternative Minimum Tax—Individuals. For information on special
limits that apply to a child who files Form 6251, see
Alternative Minimum Tax in Publication 929.
taxmap/pub17/p17-162.htm#en_us_publink1000174320The following example includes a completed Form 8615. Form 1040A
is not shown.
John and Laura Brown have one child, Sara. She is 13 and has
$2,800 taxable interest income and $1,500 earned income. She does not itemize
deductions. John and Laura file a joint return with John's name and social
security number listed first. They claim three exemptions, including an
exemption for Sara, on their return.
Because Sara is under age 18 and has more than $1,900 investment
income, part of her income may be subject to tax at her parents' rate. A
completed Form 8615 must be attached to her return.
Sara's father, John, fills out Sara's return for her. He completes
her Form 1040A through line 27, then begins completing her Form 8615.
John enters his name and social security number on Sara's Form
8615 because his name and number are listed first on the joint return he and
Laura are filing. He checks the box for married filing jointly.
He enters Sara's investment income, $2,800, on line 1. Sara does
not itemize deductions, so John enters $1,900 on line 2. He enters $900 ($2,800
− $1,900) on line 3.
Sara's taxable income on her Form 1040A, line 27, is $2,500.
This is her total income ($4,300) minus her standard deduction ($1,800). Her
standard deduction is limited to the amount of her earned income plus $300. John
enters $2,500 on line 4.
John compares lines 3 and 4 and enters the smaller amount, $900,
on line 5.
John enters $48,000 on line 6. This is the taxable income from
line 43 of John and Laura's joint Form 1040 return. Sara is an only child, so
line 7 is blank. He adds line 5 ($900), line 6 ($48,000), and line 7 (blank),
and enters $48,900 on line 8.
Using the column for married filing jointly in the Tax Table,
John finds the tax on $48,900. He enters the tax, $6,501, on line 9. He enters
$6,366 on line 10. This is the tax from line 44 of John and Laura's Form 1040.
He enters $135 on line 11 ($6,501 − $6,366).
Because line 7 is blank, John skips lines 12a and 12b and enters
$135 on line 13.
John subtracts line 5 ($900) from line 4 ($2,500) and enters
the result, $1,600, on line 14. Using the column for single filing status in the
Tax Table, John finds the tax on $1,600 and enters this tax, $161, on line 15.
He adds lines 13 ($135) and 15 ($161) and enters $296 on line 16.
Using the column for single filing status in the Tax Table, John
finds the tax on $2,500 (line 4) and enters this tax, $251, on line 17.
John compares lines 16 and 17 and enters the larger amount, $296,
on line 18 of Sara's Form 8615. He also enters that amount on line 28 of Sara's
Form 1040A.
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