Parents may elect to include their child's income from interest, dividends, and capital gains with their tax return as long as the total taxable interest, dividends, and capital gains are less than $11,000. Once the total reaches $11,000, the child must file their own return.
Both the parents and the child need to meet certain qualifications in order for the parents to make the election. See the Form 8814 instructions for details.
To include the child's income in the parent's return in ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Other Taxes
- Child's Interest/Dividend Earnings
- Select the child under the Select an Eligible Child dropdown menu
- Enter the child's interest, dividends, and capital gains info in the menu lines provided.
The first $1,100 of income is not taxed, and depending on the total the parent's tax return can be affected in one or two ways:
- Tax on the child's income - The child's tax on the unearned income in excess of $1,100 up to $2,200 is calculated at a rate of 10%. This tax is added to the parent's tax on Form 1040.
- Additional Income included on Parent's return - The amount of income in excess of $2,200 is added to the parent's return as Other Income on Schedule 1, notated "Form 8814".
To help the taxpayer/parent understand the impact of including Form 8814 in their return, they should review the information in Publication 929 here.
Reminder: Form 8814 must be completed for each child being included in the Parents' Tax Return.