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IRS.gov Website
Publication 17
taxmap/pub17/p17-167.htm#en_us_publink1000174280

Tax for Certain Children Who Have Unearned Income(p211)

rule
If a child's interest, dividends, and other unearned income total more than $2,100, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. If the parent doesn't or can't 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/p17-167.htm#en_us_publink1000174281

When Form 8615 must be filed.(p211)

rule
Form 8615 must be filed for a child if all of the following statements are true.
  1. The child's unearned income was more than $2,100.
  2. The child is required to file a return for 2016.
  3. The child either:
    1. Was under age 18 at the end of the year,
    2. Was age 18 at the end of the year and didn't have earned income that was more than half of his or her support, or
    3. Was a full-time student at least age 19 and under age 24 at the end of 2016 and didn't have earned income that was more than half of the child's support.
  4. At least one of the child's parents was alive at the end of 2016.
  5. The child doesn't file a joint return for 2016.
These conditions are also shown in
Figure 31-B, later.
taxmap/pub17/p17-167.htm#en_us_publink1000174282

Earned income.(p211)

rule
Earned income includes salaries, wages, tips, and other payments received for personal services performed. It doesn't include unearned income as defined next.
taxmap/pub17/p17-167.htm#en_us_publink100046613
Unearned income defined.(p211)
Unearned 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, unemployment compensation, taxable scholarship and fellowship grants not reported on Form W-2, the taxable part of social security and pension payments, and certain distributions from trusts. Unearned 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/p17-167.htm#en_us_publink100046625
Nontaxable income.(p211)
For this purpose, unearned income includes only amounts the child must include in total income. Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, isn't included.
taxmap/pub17/p17-167.htm#en_us_publink100046831
Income from property received as a gift.(p211)
A child's unearned 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 unearned 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/p17-167.htm#en_us_publink100046832

Example.(p212)

Amanda Black, age 13, received the following income. The dividends were qualified dividends on stock given to her by her grandparents.
Amanda's unearned income is $2,300. This is the total of the dividends ($1,000), taxable interest ($1,200), and capital gains reduced by capital losses ($300 - $200 = $100). Her wages are earned (not unearned) income because they are received for work actually done. Her tax-exempt interest isn't included because it is nontaxable.
taxmap/pub17/p17-167.htm#en_us_publink100046626
Trust income.(p212)
If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child.
However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income.
taxmap/pub17/p17-167.htm#en_us_publink1000174283

Support.(p212)

rule
Your 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 isn't considered support if your child is a full-time student. See chapter 3 for details about support.
taxmap/pub17/p17-167.htm#en_us_publink1000174284

Certain January 1 birthdays.(p212)

rule
Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed.
taxmap/pub17/p17-167.htm#en_us_publink1000261336

Figure 31-B. Do You Have To Use Form 8615 To Figure Your Child's Tax?

taxmap/pub17/p17-167.htm#en_us_publink1000261337
IF a child was born on...THEN, at the end of 2016, the child is considered to be...
January 1, 199918*
January 1, 199819**
January 1, 199324***
*This child isn't under age 18. The child meets condition 3 only if the child didn't 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 didn't have earned income that was more than half of the child's support.
***Don't use Form 8615 for this child.
taxmap/pub17/p17-167.htm#en_us_publink1000174318

Alternative minimum tax.(p213)

rule
A 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 (AMT) 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 Certain Children Under Age 24 in the Instructions for Form 6251.
taxmap/pub17/p17-167.htm#en_us_publink100041427

Net Investment Income Tax.(p213)

rule
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 IRS.gov and enter "Net Investment Income Tax" in the search box.