How to File a Kiddie Tax Return in TurboTax (w/Examples) + FAQs

Filing taxes for your child becomes complex when their unearned income exceeds certain limits. The kiddie tax, governed by Internal Revenue Code Section 1(g), requires children with investment income above $2,700 to pay tax at their parents’ marginal rate instead of their own lower rate. This rule exists because Congress enacted it through the Tax Reform Act of 1986 to prevent wealthy families from shifting income-producing assets to children in lower tax brackets, thereby reducing the family’s overall tax burden.

The consequences of mishandling this tax are significant. If you fail to file Form 8615 when required, the IRS will assess penalties and interest on the unpaid tax amount. The IRS audited fewer than 750,000 returns out of 263 million filed in fiscal year 2022, but returns with errors on child income reporting face increased scrutiny during processing.

According to current IRS data, approximately 87% of kiddie tax returns filed show adjusted gross income of $20,000 or less. This statistic reveals that the kiddie tax affects middle-class families with modest college savings accounts just as much as wealthy families with substantial investment portfolios.

In this guide, you will learn:

💰 How to determine if your child meets the five criteria that trigger Form 8615 filing requirements and what happens when even one criterion is missing

📝 The exact TurboTax navigation path to enter child investment income and automatically generate Form 8615 without manual calculations

⚖️ When to use Form 8615 versus Form 8814 and why choosing the wrong form can cost you hundreds in unnecessary taxes

🎯 Three real-world scenarios showing how different income types and amounts change your child’s tax liability from $0 to over $900

🚨 Seven critical mistakes that trigger IRS notices and how to avoid them before you click “submit”

Understanding the Kiddie Tax and IRC Section 1(g)

The kiddie tax applies to unearned income only. Unearned income includes taxable interest, ordinary and qualified dividends, capital gains from sales, capital gain distributions, rents, royalties, taxable Social Security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income received as a trust beneficiary. The tax does not apply to earned income such as wages, salaries, tips, or self-employment income, which remains taxed at the child’s own rate.

The Tax Reform Act of 1986 originally applied the kiddie tax only to children under age 14. Congress chose age 14 deliberately because this is the age when children may work in certain employment under the Fair Labor Standards Act. The Tax Increase Prevention and Reconciliation Act of 2006 raised the age threshold to under 18. Current law extends the kiddie tax even further to full-time college students under age 24 who do not provide more than half of their own financial support.

How the Kiddie Tax Thresholds Work for 2025 and 2026

For both tax years 2025 and 2026, the IRS has maintained the same three-tier structure for taxing a child’s unearned income:

Income Tier	Amount	Tax Treatment
First tier	$1,350	Tax-free (covered by standard deduction)
Second tier	Next $1,350 (total $2,700)	Taxed at child’s rate (usually 10%)
Third tier	Above $2,700	Taxed at parents’ marginal tax rate

The $1,350 tax-free amount represents the standard deduction for a dependent child with only unearned income. The second $1,350 gets taxed at the child’s own rate because this amount does not shift substantial income from the parents. Once unearned income exceeds $2,700, the kiddie tax kicks in and taxes the excess at the parents’ marginal rate, which could be as high as 37% for high-income families.

The relationship between these thresholds and actual tax liability creates consequences that many families overlook. A child with $2,699 in unearned income pays tax only at their own rate on $1,349, resulting in approximately $135 in federal tax. A child with $2,701 in unearned income—just $2 more—must file Form 8615 and calculate tax using their parents’ rate, potentially adding several hundred dollars to the family’s tax bill depending on the parents’ tax bracket.

The Evolution of Kiddie Tax Rules Under Recent Tax Reform

The Tax Cuts and Jobs Act of 2017 temporarily changed the kiddie tax calculation to use the compressed tax rates applicable to trusts and estates rather than the parents’ marginal tax rate. This change meant that a child’s unearned income above $2,600 (in 2018) could be taxed at rates as high as 37% even when the parents’ rate was lower. The Further Consolidated Appropriations Act of 2020 retroactively reversed this change, returning to the system of taxing the child’s net unearned income at the parents’ rate.

This reversal matters because trust and estate tax rates reach the top 37% bracket at only $12,950 of taxable income (in 2019), whereas married couples filing jointly do not reach the 37% bracket until taxable income exceeds $693,750. Families affected by the 2018-2019 kiddie tax rules could retroactively file amended returns to recalculate their children’s tax using the parents’ rates, often resulting in refunds.

Who Must File Form 8615

Form 8615, officially titled “Tax for Certain Children Who Have Unearned Income,” must be filed when all five of the following conditions exist:

The child has more than $2,700 of unearned income for the tax year
The child is required to file a tax return for any reason
The child does not file a joint return with a spouse
At least one of the child’s parents was alive at the end of the tax year
The child meets one of these three age-related tests:
- Was under age 18 at the end of the tax year, or
- Was age 18 at the end of the tax year and their earned income did not exceed half of their support, or
- Was age 19 to 23 at the end of the tax year, was a full-time student, and their earned income did not exceed half of their support

Breaking Down Each Filing Requirement

The $2,700 Unearned Income Threshold

The child must have unearned income exceeding $2,700. A child with exactly $2,700 does not meet this threshold and should not file Form 8615. This $2,700 represents the combined first and second tiers of the kiddie tax structure ($1,350 + $1,350). Income at or below this amount receives favorable treatment without triggering the kiddie tax calculation.

Unearned income calculation includes gross income before any deductions. If your child has $3,000 in dividend income and $500 in investment expenses, the gross unearned income is $3,000—above the threshold—even though net income after expenses is only $2,500. The expenses get deducted later in the Form 8615 calculation, but they do not reduce the gross amount used to determine whether filing is required.

The Tax Return Filing Requirement

The child must be required to file a tax return based on standard IRS filing thresholds. For 2025, a dependent child with only unearned income must file if that income exceeds $1,350. A child with both earned and unearned income must file if the total exceeds the greater of $1,350 or their earned income plus $400 (up to the standard deduction limit of $15,750).

This requirement creates an interaction effect. A child with $2,000 in unearned income and $500 in earned income has total income of $2,500—below the $2,700 kiddie tax threshold—but still must file a tax return because their income exceeds the filing requirement. In this case, Form 8615 is not needed even though a return must be filed.

The Joint Return Restriction

Children who file married filing jointly with a spouse cannot file Form 8615 because the kiddie tax rules exempt children filing joint returns. This exemption exists because filing jointly already combines the couple’s income and eliminates the income-shifting concern that motivated the kiddie tax.

However, if a married child files married filing separately, Form 8615 may be required if all other conditions are met. The marital status exception applies only to joint filing, not to marriage itself.

The Living Parent Requirement

At least one parent must be alive as of December 31 of the tax year. If both parents died during or before the tax year, the child is not subject to the kiddie tax regardless of their unearned income amount. This exception reflects the underlying purpose of the kiddie tax—to prevent parents from shifting income—which cannot occur when no parents exist.

For children with divorced or separated parents, “parent” includes both the custodial and noncustodial parent. As long as at least one biological or adoptive parent is alive, this condition is satisfied.

The Age and Support Tests

The age thresholds create three separate categories of children subject to the kiddie tax:

Under Age 18: All children under 18 at the end of the tax year fall under the kiddie tax if they meet the other requirements. Their earned income and support situation does not matter.

Age 18: Children who turned 18 during the tax year or were 18 at year-end face the kiddie tax only if their earned income did not exceed half of their own support. Support includes amounts spent on food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. If an 18-year-old child earns $15,000 and their total support costs $29,000, the child’s earned income ($15,000) exceeds half of support ($14,500), exempting them from the kiddie tax even if they have substantial unearned income.

Age 19-23 Full-Time Students: Students age 19 through 23 face the kiddie tax if they were full-time students and their earned income did not exceed half of their support. The IRS defines “full-time student” as a person enrolled for the number of hours or courses the school considers full-time during at least five months of the calendar year. The five months do not need to be consecutive.

TurboTax Version Selection for Investment Income

Before starting your return in TurboTax, you must choose the correct product edition because not all versions handle investment income and Form 8615.

TurboTax Online Deluxe cannot prepare Schedule D for capital gains and losses, which means it cannot handle stock sales, bond sales, mutual fund sales, or capital gain distributions that exceed simple reporting. If your child has only interest and ordinary dividends with no capital transactions, Online Deluxe works. If your child sold any investments, you need TurboTax Premium.

TurboTax Premium (formerly Premier) includes complete support for investment income reporting. This version handles Form 1099-DIV, Form 1099-INT, Form 1099-B for stock transactions, Schedule D, Form 8949, qualified dividends, capital gain distributions, and Form 8615. Premium can import investment data directly from participating financial institutions, eliminating manual entry of hundreds of transactions.

TurboTax Desktop/Download Deluxe differs from Online Deluxe. The desktop version can handle all forms including investment income and Form 8615, even though it carries the “Deluxe” name. If you purchase the CD/download version of Deluxe (not the online version), it includes the same forms as Premium.

Importing Investment Documents into TurboTax

TurboTax Premium can automatically import investment information from over 1,500 participating financial institutions. This feature works for Forms 1099-DIV, 1099-INT, and 1099-B. To import:

Sign in to your TurboTax account
Navigate to the “Wages & Income” section
Select “Import” and choose your financial institution
Log in to your brokerage or bank account through TurboTax’s secure connection
Select the tax year and confirm the import

The imported data populates automatically into the correct sections, reducing errors from manual transcription. TurboTax Premium can handle over 10,000 stock transactions and 20,000 cryptocurrency transactions.

Filing Form 8615 in TurboTax: Complete Step-by-Step Process

TurboTax automates most Form 8615 calculations once you enter the required information. The software determines whether Form 8615 is needed and prompts you for parent information.

Step 1: Set Up the Child’s Tax Return

You must create a separate tax return for the child in TurboTax. The child’s return is completely distinct from the parents’ return. Start a new return using the child’s name and Social Security number.

In the Personal Info section, TurboTax asks “Can someone claim you as a dependent?”. Answer “Yes” and indicate that your parent(s) will claim you. This response triggers TurboTax to apply the dependent standard deduction rules and check for kiddie tax applicability.

Do not say that the child’s Social Security number is not valid for employment unless that statement is actually true. Checking this box incorrectly can cause TurboTax to reject the child as a qualifying dependent and create errors in the kiddie tax calculation.

Step 2: Enter the Child’s Income

Navigate to “Federal” > “Wages & Income” in TurboTax. Enter all sources of income:

Earned Income: If the child has W-2 wages, enter them in the “Wages and Salaries” section. Earned income from jobs does not trigger the kiddie tax but must be reported.

Unearned Income: Enter investment income in the appropriate sections:

Interest income: Select “Interest on 1099-INT”
Dividend income: Select “Dividends on 1099-DIV”
Capital gains: Select “Stocks, Mutual Funds, Bonds, Other”
Trust distributions: Select “Income from Estates and Trusts (K-1)”

TurboTax calculates the total unearned income as you enter each form. Once unearned income exceeds $2,700, TurboTax will trigger the Form 8615 interview.

Step 3: Navigate to the Child’s Investment Income Section

After entering all income, navigate to the bottom of the “Wages & Income” list. TurboTax includes a specific topic called “Child’s Income” or “Investment Income for a Child”. Select this section.

Alternatively, TurboTax may automatically prompt you when it detects that Form 8615 is required. The software generates a message like “We need some information to complete Form 8615” or “Your child’s investment income requires Form 8615”.

If you do not see this prompt, go to “Forms” mode (available in TurboTax desktop versions) and type “8615” in the forms search. Select Form 8615 to open the interview.

Step 4: Answer the Child’s Income Interview Questions

TurboTax walks through several questions to determine Form 8615 applicability:

“What is your child’s age?” Enter the child’s age as of December 31 of the tax year.

“Is your child a full-time student?” Answer “Yes” if the child attended school full-time for at least five months during the year.

“Did your child provide more than half of their own support?” Answer this carefully. “Support” means the total cost of food, housing, clothing, education, medical care, recreation, and transportation. If the child’s earned income exceeded half of this total amount, answer “Yes”. This question disqualifies most college students from the kiddie tax even if they are under 24.

“Is at least one parent alive?” Answer “Yes” if either parent was alive on December 31.

“Did your child file a joint return?” Answer “No” unless the child is married and filed jointly with a spouse.

Step 5: Enter Parent Information

Once TurboTax determines that Form 8615 is required, it prompts for parent information:

“What is your parent’s filing status?” Select from:

Married filing jointly
Married filing separately
Single
Head of household
Qualifying surviving spouse

“What is your parent’s taxable income?” Enter the amount from the parent’s Form 1040, Line 15. This figure is the parent’s taxable income after deductions but before calculating tax.

If parents filed jointly, use the taxable income from their joint return even if one spouse is not the child’s biological parent. If parents filed separately or are unmarried, special rules apply:

If unmarried parents lived together with the child, use the parent with higher taxable income
If divorced or separated parents, use the custodial parent (the parent with whom the child lived for more nights during the year)
If the child lived equal time with each parent, use the parent with higher adjusted gross income

“What is your parent’s Social Security number?” TurboTax requests this for IRS matching purposes. If you cannot obtain the parent’s SSN, you may leave it blank. However, leaving it blank may trigger IRS correspondence requesting the information.

Step 6: Enter Additional Parent Tax Information

TurboTax needs the parent’s actual tax liability to calculate the kiddie tax:

“What is your parent’s tax before credits?” Enter the amount from the parent’s Form 1040, Line 16, minus any alternative minimum tax. Do not include:

Tax from Form 4972 (relating to lump-sum distributions)
Additional Medicare tax
Net investment income tax
Self-employment tax

If the parent used special worksheets to calculate their tax (Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule J), check the box indicating this. TurboTax needs this information to perform parallel calculations for the child.

Step 7: Handle Multiple Children with Unearned Income

If the parent has multiple children filing Form 8615, TurboTax needs additional information. The form must account for the combined net unearned income of all children subject to the kiddie tax.

On each child’s Form 8615 in TurboTax, answer “Yes” when asked “Do you have siblings who are also filing Form 8615?”. Then enter:

Each sibling’s name and Social Security number
Each sibling’s net unearned income from Form 8615, Line 5

This information allows TurboTax to calculate each child’s “allocable parental tax”—the child’s proportionate share of the additional tax caused by adding all children’s net unearned income to the parent’s taxable income.

Step 8: Review Form 8615 Calculations

After entering all information, navigate to Forms view in TurboTax. Locate Form 8615 to review the calculations:

Part I: Child’s Net Unearned Income

Line 1: Child’s unearned income (interest, dividends, capital gains, etc.)
Line 2: $2,700 (if child has no earned income)
Line 3: Net unearned income (Line 1 minus Line 2)

Part II: Tentative Tax at Parent’s Rate

Line 6: Parent’s taxable income
Line 7: Combined net unearned income of all children
Line 8: Parent’s taxable income plus children’s net unearned income
Line 9: Tax on Line 8 amount
Line 10: Parent’s actual tax
Line 11: Allocable parental tax (Line 9 minus Line 10)

Part III: Child’s Tax

Line 13: Child’s allocable share of the allocable parental tax
Line 18: Child’s total tax (larger of regular tax or kiddie tax)

TurboTax performs these calculations automatically, but reviewing them helps identify data entry errors.

Step 9: Attach Form 8615 to Child’s Return

TurboTax automatically attaches Form 8615 to the child’s Form 1040 when you e-file. The form flows to the correct line on Form 1040, Line 16.

If paper-filing, TurboTax prints Form 8615 as part of the return package. Attach Form 8615 directly behind Form 1040 in the order that TurboTax prints them.

Step 10: File the Child’s Return Separately

The child’s return files separately from the parent’s return. You cannot combine them even though Form 8615 uses the parent’s tax information.

When e-filing, create separate TurboTax accounts or files for the parent and child. E-file each return independently. When paper-filing, mail the child’s return in a separate envelope from the parent’s return.

The Alternative: Using Form 8814 to Report Child’s Income on Parent’s Return

Form 8814, “Parent’s Election to Report Child’s Interest and Dividends,” allows parents to include certain child income directly on their own tax return, eliminating the need to file a separate return for the child.

Requirements for Using Form 8814

Parents can elect to file Form 8814 only when all of the following conditions are met:

The child’s gross income was less than $13,500
The child’s only income was from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends)
The child is required to file a tax return
The child does not file a joint return for the year
No federal income tax was withheld from the child’s income under backup withholding rules
No estimated tax payments were made for the child for the tax year (including any prior year overpayment applied to estimated tax)
The child does not have a valid identity protection PIN

The $13,500 limit differs from the $2,700 Form 8615 threshold. Form 8814 can be used even when the child’s income exceeds $2,700, as long as it remains below $13,500 and consists only of interest and dividends.

Advantages and Disadvantages of Form 8814

Advantages:

Eliminates need to file a separate return for the child
Reduces paperwork and simplifies record-keeping
Avoids obtaining a signature from a minor child on Form 1040

Disadvantages:

May result in higher tax liability than filing separately
Parent loses ability to claim certain deductions that the child could take:
- Additional standard deduction if the child is blind
- Penalty on early withdrawal of the child’s savings
- Itemized deductions such as the child’s charitable contributions
Increases parent’s adjusted gross income, potentially reducing phase-out benefits for other tax items
First $1,350 of child’s income becomes completely tax-free, but the next $1,350 is taxed at the parent’s rate rather than the child’s rate

The tax difference can be significant. If the parent’s marginal rate is 24% and the child’s rate would be 10%, the second $1,350 of income costs $324 in tax using Form 8814 ($1,350 × 24%) versus $135 using the child’s separate return ($1,350 × 10%). This represents $189 in additional tax.

Filing Form 8814 in TurboTax

To elect Form 8814 in TurboTax for the parent’s return:

Navigate to “Federal” > “Deductions & Credits”
Select “I’ll choose what I work on”
Scroll to “Family” section
Click “Child’s interest and dividend income on your return (Form 8814)”
Click “Start” or “Revisit”

TurboTax will ask:

Child’s name and Social Security number
Total interest income
Total dividend income
Any capital gain distributions

TurboTax calculates the tax and generates Form 8814. If you have multiple children, file a separate Form 8814 for each child.

Form 8814 Example Calculation

Consider a child with $4,000 in dividend income and no other income. The parents file jointly with taxable income of $180,000 (24% bracket).

Using Form 8615 (separate child return):

First $1,350: tax-free = $0
Next $1,350: taxed at child’s 10% rate = $135
Remaining $1,300: taxed at parents’ 24% rate = $312
Total tax: $447

Using Form 8814 (on parent’s return):

First $1,350: tax-free = $0
Remaining $2,650: taxed at parents’ 24% rate = $636
Total tax: $636

Form 8814 costs this family $189 more in taxes ($636 – $447).

Three Common Kiddie Tax Scenarios

Scenario 1: Child with Dividend Income from UGMA Account

Emma is 16 years old and can be claimed as a dependent by her parents. Her parents file jointly with taxable income of $150,000, placing them in the 22% tax bracket. Emma has no earned income from a job. Her grandmother established a UGMA custodial account for Emma’s college education, which generated $5,000 in qualified dividend income during 2025.

Income Component	Amount	Tax Rate	Tax Owed
First $1,350 of unearned income	$1,350	0% (standard deduction)	$0
Next $1,350 of unearned income	$1,350	10% (child’s rate)	$135
Remaining unearned income	$2,300	15% (preferential rate for qualified dividends)	$345
Total tax	$5,000	Various	$480

Emma must file Form 8615 because she meets all five requirements: (1) unearned income exceeds $2,700, (2) gross income exceeds filing threshold, (3) not filing jointly, (4) both parents alive, and (5) under age 18. In TurboTax, Emma’s parents enter their $150,000 taxable income and their tax amount. TurboTax calculates that $2,300 of Emma’s qualified dividends receive preferential long-term capital gains treatment at 15% because her parents are in the 22% ordinary income bracket.

Without the kiddie tax, Emma would pay 0% tax on her qualified dividends because her income falls below the 0% qualified dividend threshold for single filers. The kiddie tax costs Emma’s family $345 in additional federal tax.

Scenario 2: College Student with Investment Income and Part-Time Job

Michael is 21 years old, a full-time college student, and lives at home with his parents during breaks. His parents provide $20,000 in support (tuition, room, board, health insurance). Michael has two income sources: $8,000 in wages from a part-time job and $3,500 in interest income from bonds his parents gifted him.

Michael’s total support costs $20,000. His earned income of $8,000 is less than half of his support ($10,000), so he remains subject to the kiddie tax even though he is over 18.

Income Type	Amount	Treatment
Earned income (wages)	$8,000	Taxed at Michael’s rate; reduces standard deduction dollar-for-dollar
Unearned income (interest)	$3,500	First $2,700 receives standard treatment; $800 taxed at parents’ rate
Standard deduction	$8,400	$8,000 earned income + $400

Michael’s taxable income calculation:

Gross income: $11,500 ($8,000 + $3,500)
Standard deduction: $8,400
Taxable income: $3,100

Michael’s tax calculation:

$2,300 ordinary income from wages at 10%: $230
$800 net unearned income at parents’ 24% rate: $192
Total tax: $422

If Michael had earned $10,100 or more from his job (more than half of his $20,000 support), he would not be subject to the kiddie tax at all. The $800 of interest income above $2,700 would be taxed at his own 10% rate ($80) instead of his parents’ 24% rate ($192), saving $112 in taxes.

Scenario 3: Child Under 18 with Inherited IRA Distribution

Sophia is 15 years old and inherited an IRA from her grandfather who passed away in 2023. The IRA generates $12,000 in taxable distributions during 2025 that Sophia must take under the 10-year rule. Sophia has no earned income and her parents file jointly with taxable income of $320,000, placing them in the 35% tax bracket.

Income Component	Amount	Tax Rate	Tax Owed
First $1,350 (standard deduction)	$1,350	0%	$0
Next $1,350	$1,350	10% (child’s rate)	$135
Remaining $9,300	$9,300	35% (parents’ rate)	$3,255
Total tax	$12,000	Various	$3,390

Sophia faces a filing requirement because her gross income ($12,000) substantially exceeds the $1,350 threshold for dependents with only unearned income. Form 8615 is required.

The inherited IRA income is ordinary income, not capital gains, so it does not receive preferential rates. The kiddie tax results in $3,255 being taxed at the parents’ 35% rate instead of Sophia’s 10% rate, creating $2,325 in additional tax ($9,300 × 25% difference in rates).

Sophia’s parents could consider several strategies to reduce the kiddie tax impact:

Delay taking distributions until Sophia turns 18 and her earned income exceeds half her support
Spread distributions more evenly across years to keep each year’s amount closer to the $2,700 threshold
Use a portion of the distribution to pay for Sophia’s qualified education expenses, effectively shifting the income to expenses that provide tax benefits elsewhere

Mistakes to Avoid When Filing Kiddie Tax Returns

Mistake 1: Using Parents’ Election When Child Has Substantial Income

Parents sometimes attempt to file Form 8814 when the child’s income exceeds $13,500 or includes income types beyond interest and dividends. TurboTax will reject this election because the child does not qualify.

Filing Form 8814 when Form 8615 should be used results in incorrect tax calculation. The parent’s return will be incomplete because it fails to report income that belongs on a separate return for the child. If discovered during processing, the IRS will send a notice requesting the child file a separate return.

The consequence: The IRS assesses accuracy-related penalties of 20% on any underpayment of tax resulting from substantial understatement. Interest accrues from the original due date of the return until the correct tax is paid.

Mistake 2: Failing to File When Unearned Income Barely Exceeds $2,700

Some families reason that if unearned income is only slightly above $2,700—say, $2,750—the tax difference is minimal and Form 8615 can be skipped. This is incorrect because Form 8615 is required by law when the threshold is exceeded, regardless of how small the excess is.

The filing requirement is not optional or based on whether tax is owed. Even if the kiddie tax calculation results in the same total tax as calculating without Form 8615, the form must still be attached to the return.

The consequence: Failing to file Form 8615 when required results in an incomplete tax return. The IRS can assess penalties for failure to file correct information, which start at $290 per return (for 2025). Additionally, the return may be selected for examination to verify the child’s income.

Mistake 3: Reporting Incorrect Parent Taxable Income

The most common error on Form 8615 is entering the wrong amount for parent’s taxable income. Parents sometimes enter:

Adjusted gross income instead of taxable income
Total tax instead of taxable income
Gross income before deductions

The correct amount is Form 1040, Line 15—taxable income after all adjustments and deductions but before calculating tax.

The consequence: Incorrect parent taxable income causes the entire Form 8615 calculation to be wrong. If the entered amount is too high, the child overpays tax. If too low, the child underpays and will receive a bill plus interest.

Mistake 4: Claiming the Child is Not a Dependent to Avoid Kiddie Tax

Some families incorrectly believe that if the child files their own return and is not claimed as a dependent, the kiddie tax does not apply. This is false because the kiddie tax applies “whether or not the child is a dependent”.

The statute at IRC Section 1(g) bases the kiddie tax on the child’s age, income, and relationship to living parents—not on whether the child is actually claimed as a dependent.

The consequence: If the child files as not a dependent when they actually qualify as a dependent, the return is incorrect in multiple ways: the child improperly claims a full standard deduction or personal exemption they are not entitled to, and the parents’ return is incorrect for not claiming the child. This triggers matching notices from the IRS and potential audits of both returns.

Mistake 5: Missing the Support Test for Ages 18-23

Parents and college students frequently misunderstand the support test. They assume that because the student lives at the college address for most of the year and has substantial income from a job or internship, the student provides more than half of their own support.

Support includes tuition, room, board, health insurance, transportation, and other costs. A college student with $15,000 in earnings whose parents pay $40,000 in college costs does not provide more than half of their support because their $15,000 is less than half of the total $55,000 cost.

The consequence: The student files a return without Form 8615, believing they are exempt due to providing their own support. The IRS computer matching detects that the student was claimed as a dependent on the parents’ return and had unearned income exceeding $2,700. The IRS sends a notice requiring Form 8615 and assessing additional tax plus interest and penalties.

Mistake 6: Using Wrong Parent When Parents File Separately

When parents file separate returns or are not married to each other, determining which parent’s information to use on Form 8615 creates confusion.

The rules are:

If parents are married but file separately: Use the parent with higher taxable income
If parents are divorced or never married: Use the custodial parent (the one the child lived with for more nights)
If the child lived equal time with each parent: Use the parent with higher adjusted gross income

Some families use the noncustodial parent’s information because that parent provided more financial support or paid for the child’s investments. This is incorrect if the child lived primarily with the other parent.

The consequence: Using the wrong parent’s information miscalculates the kiddie tax. If the correct parent has higher tax rates, the child underpays. The IRS will recalculate using the correct parent’s information and assess additional tax, interest, and penalties.

Mistake 7: Combining Multiple Children’s Returns

When parents have two or more children subject to the kiddie tax, they sometimes try to file a single return for all children combined. This is never allowed because each person must file their own individual income tax return.

Some families create this error by using Form 8814 for multiple children and then believing the children do not need separate returns. Form 8814 can be used for multiple children, but parents must file a separate Form 8814 for each child.

The consequence: Filing a single return for multiple taxpayers is not permitted under any circumstance. The IRS will reject the return and require separate returns for each child. This typically delays processing by months and may cause the returns to be filed late, triggering late-filing penalties.

Do’s and Don’ts When Filing Kiddie Tax Returns

Do’s

Do gather parent’s tax return information before starting child’s return. Form 8615 requires specific information from the parent’s Form 1040, Line 15 (taxable income) and Line 16 (tax). Having the parent’s completed return available eliminates guesswork and prevents errors. If the child’s return is due before the parent completes their return, file an extension for the child using Form 4868. The child’s return can be completed once the parent’s information becomes available.

Do include all sources of unearned income when calculating the $2,700 threshold. Unearned income includes interest, dividends, capital gains, rents, royalties, taxable Social Security benefits, taxable scholarships, trust distributions, and Alaska Permanent Fund dividends. Each source must be added together to determine if the threshold is exceeded. Forgetting one source can result in failing to file Form 8615 when required.

Do verify the child’s standard deduction calculation. The standard deduction for a dependent child is the greater of $1,350 or the child’s earned income plus $400, but cannot exceed $15,750. TurboTax calculates this automatically, but verifying the amount helps identify input errors. A child with $5,000 in wages and $1,000 in interest has a standard deduction of $5,400 ($5,000 + $400), not the full $15,750 and not just $1,350.

Do use TurboTax Premium if the child has any stock sales or capital gains. TurboTax Online Deluxe cannot prepare Schedule D or Form 8949, which are required for reporting sales of investments. Attempting to report stock sales in Online Deluxe will prompt an upgrade message. Start with Premium from the beginning to avoid re-entering data after upgrading.

Do keep documentation of support calculations for college students ages 19-23. Support includes tuition, room and board, health insurance, books, supplies, transportation, clothing, entertainment, and personal expenses. Maintain records showing the total cost of support and the portion the child paid from their own earnings. If the child paid more than half from earnings, they are exempt from the kiddie tax even with substantial unearned income. The IRS may request this documentation during an examination.

Don’ts

Don’t use Form 8814 just because it seems simpler than filing a separate return for the child. Form 8814 almost always results in higher total tax than filing Form 8615 with a separate child return. The difference can range from $50 to over $500 depending on income amounts and parent’s tax bracket. Calculate tax both ways before deciding, or use TurboTax to compare scenarios. Only use Form 8814 when the child’s income consists entirely of a small amount of interest and dividends and the administrative convenience outweighs the tax cost.

Don’t assume that 529 plan distributions are subject to kiddie tax. Qualified withdrawals from 529 college savings plans and Coverdell Education Savings Accounts are tax-free when used for qualified education expenses. These amounts are not included in the child’s gross income and do not count toward the $2,700 unearned income threshold. Only report 529 distributions on the child’s return when the withdrawal exceeds qualified expenses and generates taxable earnings.

Don’t enter estimated tax payments or tax withholdings under the child’s information if they were actually made under the parent’s information. Tax payments and withholdings must match the Social Security number used when making the payment. If the child’s tax was withheld from investment distributions using the child’s SSN, report it on the child’s return. If no withholding occurred from the child’s distributions, leave those fields blank even if the parent increased their withholding to cover the expected kiddie tax.

Don’t file the parent’s and child’s returns in the same TurboTax file or account. Each taxpayer needs their own separate TurboTax return file. Create a separate login or file for the child’s return. This prevents accidentally combining information from multiple people on a single Form 1040, which the IRS will reject. When both returns are complete, e-file them separately.

Don’t paper-file unless absolutely necessary. E-filing processes faster, reduces errors through built-in IRS error checking, and provides confirmation of receipt. Paper returns take 6-12 months to process in normal circumstances. If both parents claim the same child and you must file a paper return to resolve it, expect significant delays. E-file the returns correctly from the beginning to avoid this situation.

Pros and Cons of Filing Separate Return Versus Parent’s Election

Approach	Pros	Cons
File separate return for child with Form 8615	– Lower total tax in most cases ($100-$500 savings) – Child can claim all deductions and credits they qualify for – Does not increase parent’s AGI, preserving income-based phase-outs – Works for any amount or type of unearned income	– Requires filing additional tax return – Must obtain parent’s tax information – More complex when multiple siblings have unearned income – Minor child must sign return or parent signs as guardian
Parent uses Form 8814 to report child’s income	– Eliminates filing separate return for child – Simplifies record-keeping – No Form 8615 required	– Usually results in higher tax (second $1,350 taxed at parent’s rate) – Only available for interest and dividends under $13,500 – Cannot use if child had tax withheld or estimated tax payments – Child loses itemized deductions and certain other deductions – Increases parent’s AGI, potentially reducing other tax benefits

Understanding Net Investment Income Tax and Kiddie Tax Interaction

Children subject to the kiddie tax may also owe the 3.8% Net Investment Income Tax (NIIT) on their unearned income. The NIIT applies to the lesser of (1) net investment income or (2) the amount by which modified adjusted gross income exceeds the threshold.

For children subject to the kiddie tax, the NIIT threshold is only $12,950 (for 2023) because the kiddie tax uses the compressed trust and estate thresholds for NIIT purposes. This means a child with $13,000 in investment income owes NIIT on $50 ($13,000 – $12,950), adding $1.90 to their tax bill ($50 × 3.8%).

The combination of kiddie tax and NIIT can result in marginal rates as high as 40.8% (37% ordinary income tax + 3.8% NIIT) on a child’s investment income above $12,950. This rate applies even if the child’s total income is modest because the kiddie tax uses the parents’ rates.

TurboTax calculates NIIT automatically when applicable. The tax appears on Form 8960 and flows to Form 1040, Schedule 2, Line 17.

Filing Deadlines and Extension Rules

The filing deadline for the child’s tax return is the same as for all individual returns: April 15 (or the next business day if April 15 falls on a weekend or holiday). For tax year 2025, the deadline is April 15, 2026.

If the child needs more time to file, request an extension using Form 4868. The extension provides until October 15, 2026 to file the return without late-filing penalties.

Important: An extension to file is not an extension to pay. Any tax owed is still due by April 15, 2026. If the child owes tax and does not pay by April 15, interest and late-payment penalties accrue from April 15 even if an extension was filed.

Special Timing Issue with Parent’s Information

If the child is ready to file but the parent has not completed their tax return, the child faces a timing problem. Form 8615 requires the parent’s taxable income and tax amount from the parent’s completed return.

The child has two options:

Option 1: File extension for child’s return. File Form 4868 for the child by April 15, extending the child’s filing deadline to October 15. Most parents will have completed their returns by then, providing the necessary information. Pay any estimated tax owed with the extension form to avoid penalties and interest.

Option 2: Request parent’s information from IRS. After the end of the tax year, the child (or parent) can send a written request to the IRS asking for the parent’s taxable income and tax information needed to complete Form 8615. The request must include:

A statement that the request is made to comply with IRC Section 1(g) and that attempts to get the information directly from the parent were unsuccessful
Proof of the child’s age (copy of birth certificate)
Evidence the child has more than $2,700 of unearned income (copies of 1099 forms)
Parent’s name, address, Social Security number (if known), and filing status (if known)

Mail the request to the IRS Service Center where the parent’s return will be filed. The IRS cannot process requests received before the end of the tax year.

State Tax Conformity and Kiddie Tax

Most states that impose income tax conform to the federal kiddie tax rules, but several important differences exist:

Community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin) have special rules about ownership of income and assets between spouses. In these states, property acquired during marriage is generally community property owned 50/50 by both spouses. When a child receives a gift of income-producing property in a community property state, determining whose income is being shifted can affect the kiddie tax calculation.

States without income tax (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) do not have kiddie tax because they have no personal income tax. Families in these states file federal Form 8615 but owe no state tax on the child’s unearned income.

New Hampshire taxes only interest and dividend income, not wages or other income types. The kiddie tax applies only to a child’s interest and dividends above the threshold.

Frequently Asked Questions

Can I avoid the kiddie tax by putting investments in my child’s name?

No. The kiddie tax specifically prevents this strategy. Income-producing assets transferred to a child still generate income taxed at the parents’ rates when the child meets the kiddie tax requirements. The strategy of shifting income to children to reduce family tax burden is precisely what Congress enacted the kiddie tax to eliminate in 1986.

Does my child need their own TurboTax account to file?

Yes. Each taxpayer must file their own return in a separate TurboTax file. Create a new TurboTax account using the child’s name or create a new return file within your TurboTax account. Do not add the child’s income to your return unless you are using Form 8814.

Can both parents claim the same child as a dependent?

No. Only one taxpayer can claim a child as a dependent per tax year. If both parents try to claim the same child, the IRS will reject the second e-filed return. If both paper-filed, the IRS will send letters to both parents requiring them to resolve the situation.

Is my child’s scholarship taxable and subject to kiddie tax?

Yes, if the scholarship exceeds qualified education expenses. The taxable portion of a scholarship (the amount not used for tuition, fees, books, and required supplies) is unearned income subject to the kiddie tax if it is not reported on Form W-2.

What happens if I file Form 8615 but should have used Form 8814?

No penalty. Filing Form 8615 when you could have used Form 8814 is not an error. Form 8815 is always an acceptable method to report child investment income. You simply chose not to use the simpler election. The returns are processed normally with no corrections needed.

Can I amend last year’s return to file Form 8615 if I forgot it?

Yes. File Form 1040-X, Amended U.S. Individual Income Tax Return, for the child. Attach the Form 8615 that should have been filed originally. Pay any additional tax, interest, and penalties owed. The IRS allows amended returns within three years of the original filing deadline.

Does the kiddie tax apply to my 16-year-old’s summer job wages?

No. The kiddie tax applies only to unearned income. Wages from employment are earned income taxed at the child’s own rate regardless of age. However, if your child has both wages and investment income, the investment income may still be subject to kiddie tax.

Can I gift my child $20,000 to invest without kiddie tax?

No. The gift itself is not taxed to the child (gifts are not income). However, once the $20,000 is invested, any interest, dividends, or capital gains it generates become the child’s unearned income subject to kiddie tax if over $2,700. The kiddie tax applies to income, not to the asset itself.

Is my child’s Roth IRA subject to kiddie tax?

No. Roth IRA earnings grow tax-free and qualified distributions are tax-free. No income is reported on the child’s tax return from a Roth IRA as long as distributions are qualified. Even non-qualified distributions distribute contributions first (tax-free) before earnings. Only non-qualified distributions of earnings would potentially be taxable unearned income.

Does my child owe self-employment tax on their unearned income?

No. Self-employment tax applies only to self-employment earnings (net profit from a business). Unearned income such as interest, dividends, and capital gains never incurs self-employment tax. The kiddie tax is a separate income tax rule. If your child operates their own business, those profits are subject to self-employment tax but not kiddie tax.

What if my child’s only investment is a 529 plan?

No tax. Qualified distributions from 529 plans are completely tax-free. The child does not report 529 distributions on their tax return when used for qualified education expenses. The 529 earnings never count toward the $2,700 unearned income threshold.

Can I file Form 8615 if my child is age 25?

No. The kiddie tax only applies to children under age 18 or full-time students age 18-23. Once a child turns 24 (or turns 19 and is not a full-time student), they are never subject to kiddie tax regardless of their income or support situation. A 25-year-old child files as an independent taxpayer even if parents claim them as a dependent for other purposes.

Does kiddie tax apply if my child has no parents?

No. Form 8615 requires that at least one parent was alive at the end of the tax year. If both parents are deceased, the child is not subject to kiddie tax even with substantial unearned income. The child’s unearned income is taxed at the child’s own rates.

Can I pay the child’s tax from my bank account?

Yes, but the payment must be made using the child’s Social Security number as the taxpayer identifier. When making electronic payments through IRS Direct Pay, EFTPS, or credit card processors, enter the child’s SSN, not yours. If you write a check, include the child’s SSN and “2025 Form 1040” on the memo line.

What if my child can’t get parent’s SSN for Form 8615?

TurboTax allows you to leave the parent’s SSN blank. However, the IRS may send a notice requesting this information. If the parent refuses to provide their SSN and you cannot obtain it, you can file Form 8615 with the parent’s name and address but no SSN, explaining the situation in an attached statement.

Is form 8615 required if I file married jointly with my child’s other parent?

Yes, if the child meets the other requirements. The kiddie tax applies regardless of whether parents file jointly or separately. Joint filing makes Form 8615 simpler because you use the information from the single joint return. The complexity increases only when parents file separately or are unmarried.

Will TurboTax calculate Form 8615 automatically?

Yes, once you answer the interview questions about the child’s age, income, and parent information. TurboTax generates Form 8615 automatically and includes it with the child’s e-filed return. You can review the form in Forms mode to verify calculations.

How do I know if TurboTax is using the correct parent?

Check Form 8615, Lines A and B in TurboTax’s Forms view. Line A should show the parent’s name and Line B should show their SSN. Verify Line C shows the correct filing status. If you are the custodial parent and the form shows the noncustodial parent, review your answers in the Child’s Income interview section.

Can my child claim standard deduction with Form 8615?

Yes. Filing Form 8615 does not eliminate the child’s standard deduction. The standard deduction reduces the child’s taxable income before the kiddie tax calculation begins. A dependent child’s standard deduction is $1,350 or their earned income plus $400 (up to $15,750).

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