ProWeb: Form 8615 - Kiddie Tax

Note: The Further Consolidated Appropriations Act, 2020 changed the rules regarding the Kiddie Tax calculation for tax year 2019 and retroactively for tax year 2018. Taxpayers had the option of using the new rules or the old rules for those years. 

For children under age 18 and certain older children, unearned income over an annual threshold amount is taxed at the parent's rate if the parent's rate is higher than the child's. This tax is calculated on Form 8615, Tax for Certain Children Who Have Unearned Income.

Unearned income, as opposed to earned income that is received for work actually performed, consists of the following types of income:

• taxable interest
• dividends
• capital gains (including capital gain distributions)
• rents and royalties
• pensions and annuities
• taxable scholarship and fellowship grants not reported on Form W-2
• unemployment compensation
• alimony
• the taxable part of social security and pension payments
• income (other than earned income) received as the beneficiary of a trust

Form 8615 can be filed if all of the following conditions are met:

1. The child had more than the threshold amount of unearned income;
2. The child is required to file a tax return;
3. The child is either:
1. Under age 18 at the end of tax year;
2. Age 18 at the end of tax year and didn’t have earned income that was more than half of their support; or
3. A full-time student age 19-24 at the end of tax year and didn’t have earned income that was more than half of their support.
4. At least one of the child's parents was alive at the end of tax year;
5. The child isn't filing a joint return for the tax year being filed

These conditions apply whether or not the child is a dependent but don't apply if both parents are deceased at the end of the year.

To include Form 8615 with a child's tax return, from the Federal Section of the child's tax return (Form 1040) select:

• Other Taxes
• Tax for Children Who Have Unearned Income (8615)
• Enter the Parent’s Information (use the parent who is listed first on a MFJ return; if MFS or not married use the parent whose return had the higher income).
• Complete the Form 8615 Edit Menu - You will need a copy of the parent's tax return to complete this form, either the MFJ return, or the MFS return of the parent with the higher income, or the return from the parent with whom the child resided the most during the tax year.

As an alternative, the parent(s) can elect to report the child's interest, ordinary dividends, and capital gain distributions on their return rather than on Form 8615. If so, include Form 8814, Parents’ Election To Report Child's Interest and Dividends, instead of Form 8615 with the parents' tax return.

Note: This is a guide on entering Form 8615 into TaxSlayer ProWeb. This is not intended as tax advice. Refer to the IRS instructions below for more information.

Additional Information:

IRS: Instructions for Form 8615, Tax for Certain Children Who Have Unearned Income