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Publication 17

Parent's Election To Report Child's Interest and Dividends(p205)

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 won't 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.

Certain January 1 birthdays.(p206)

A child born on January 1, 1997, is considered to be age 19 at the end of 2015. You can't make this election for such a child unless the child was a full-time student.
A child born on January 1, 1992, is considered to be age 24 at the end of 2015. You can't make this election for such a child.

Full-time student.(p206)

A full-time student is a child who during some part of each of any 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 doesn't include an on-the-job training course, correspondence school, or school offering courses only through the Internet.

How to make the election.(p206)

Make the election by attaching Form 8814 to your Form 1040. (If you make this election, you can't 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.

Effect of Making the Election(p206)

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

Rate may be higher.(p206)

If your child received qualified dividends or capital gain distributions, you may pay up to $105 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 $1,050 and $2,100 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.

Deductions you can't take.(p206)

By making the Form 8814 election, you can't take any of the following deductions that the child would be entitled to on his or her return.

Reduced deductions or credits.(p206)

If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following.

Penalty for underpayment of estimated tax.(p206)

If you make this election for 2015 and didn't 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 2016, 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.

Figuring Child's Income(p206)

Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Only the amount over $2,100 is added to your income. The amount over $2,100 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.

Capital gain distributions and qualified dividends.(p206)

If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Pub. 929, Part 2. If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Pub. 929, Part 2.

Figuring Additional Tax(p206)

Use Form 8814, Part II, to figure the tax on the $2,100 of your child's interest and dividends that you don't 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 − $1,050), or
  2. $105.
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.

Figure 31-A. Can You Include Your Child's Income On Your Tax Return?