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IRS.gov Website
Publication 17
taxmap/pub17/p17-165.htm#en_us_publink1000174260

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

For Use in Tax Year 2013
rule
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.
taxmap/pub17/p17-165.htm#en_us_publink1000174262

Certain January 1 birthdays.(p208)

For Use in Tax Year 2013
rule
A child born on January 1, 1995, is considered to be age 19 at the end of 2013. You cannot make this election for such a child unless the child was a full-time student.
A child born on January 1, 1990, is considered to be age 24 at the end of 2013. You cannot make this election for such a child.
taxmap/pub17/p17-165.htm#en_us_publink1000174263

Full-time student.(p209)

For Use in Tax Year 2013
rule
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 does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.
taxmap/pub17/p17-165.htm#en_us_publink1000174264

How to make the election.(p209)

For Use in Tax Year 2013
rule
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.
taxmap/pub17/p17-165.htm#en_us_publink1000174265

Effect of Making the Election(p209)

For Use in Tax Year 2013
rule
The federal income tax on your child's income may be more if you make the Form 8814 election.
taxmap/pub17/p17-165.htm#en_us_publink1000174266

Rate may be higher.(p209)

For Use in Tax Year 2013
rule
If your child received qualified dividends or capital gain distributions, you may pay up to $100 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 $1,000 and $2,000 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.
taxmap/pub17/p17-165.htm#en_us_publink1000174267

Deductions you cannot take.(p209)

For Use in Tax Year 2013
rule
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.
taxmap/pub17/p17-165.htm#en_us_publink1000174268

Reduced deductions or credits.(p209)

For Use in Tax Year 2013
rule
If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following.
taxmap/pub17/p17-165.htm#en_us_publink1000174269

Penalty for underpayment of estimated tax.(p209)

For Use in Tax Year 2013
rule
If you make this election for 2013 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 2014, 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.
taxmap/pub17/p17-165.htm#en_us_publink1000174271

Figuring Child's Income(p209)

For Use in Tax Year 2013
rule
Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Only the amount over $2,000 is added to your income. The amount over $2,000 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.
taxmap/pub17/p17-165.htm#en_us_publink1000174272

Capital gain distributions and qualified dividends.(p209)

For Use in Tax Year 2013
rule
If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2.
taxmap/pub17/p17-165.htm#en_us_publink1000174273

Figuring Additional Tax(p209)

For Use in Tax Year 2013
rule
Use Form 8814, Part II, to figure the tax on the $2,000 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 − $1,000), or
  2. $100.
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.
taxmap/pub17/p17-165.htm#en_us_publink1000310110

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

taxmap/pub17/p17-165.htm#en_us_publink1000310111