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IRS.gov Website
Publication 17
taxmap/pub17/p17-164.htm#en_us_publink1000174241

Chapter 31
Tax on Unearned Income of Certain Children(p208)

What's New(p208)


taxmap/pub17/p17-164.htm#TXMR64fe7fa5
Net Investment Income Tax. (p208)
For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). NIIT is a 3.8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. Use Form 8960, Net Investment Income Tax, to figure this tax. For more information on NIIT, go to www.irs.gov and enter "Net Investment Income Tax" in the search box.
taxmap/pub17/p17-164.htm#en_us_publink1000177258
This chapter discusses the following two rules that may affect the tax on unearned income of certain children.
  1. If the child's interest and dividend income (including capital gain distributions) total less than $10,000, 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.)
  2. If the child's interest, dividends, and other unearned income total more than $2,000, 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 Unearned Income, 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.

taxmap/pub17/p17-164.htm#TXMP334d53fb

Useful items

You may want to see:


Publication
 929 Tax Rules for Children and Dependents
Form (and Instructions)
 8615: Tax for Certain Children Who Have Unearned Income
 8814: Parents' Election To Report Child's Interest and Dividends
taxmap/pub17/p17-164.htm#en_us_publink1000174246

Which Parent's
Return To Use(p208)

rule
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 unearned 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 Unearned Income.
taxmap/pub17/p17-164.htm#en_us_publink1000174248

Parents Who Do Not File a Joint Return(p208)

rule
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.
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Parents are married.(p208)

rule
If the child's parents file separate returns, use the return of the parent with the greater taxable income.
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Parents not living together.(p208)
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 chapter 2.
taxmap/pub17/p17-164.htm#en_us_publink1000174253

Parents are divorced.(p208)

rule
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/pub17/p17-164.htm#en_us_publink1000174254
Custodial parent remarried.(p208)
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/pub17/p17-164.htm#en_us_publink1000174256

Parents never married.(p208)

rule
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/pub17/p17-164.htm#en_us_publink1000174258

Widowed parent remarried.(p208)

rule
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.