Kiddie Tax: Form 8615 (Tax for Certain Children Who Have Unearned Income)

The Kiddie Tax is a special tax rule that applies to a child’s unearned income (such as interest, dividends, and capital gains). It is designed to prevent parents from shifting investment income to children to benefit from lower tax brackets.

Who Does the Kiddie Tax Apply To?

The Kiddie Tax applies if all of the following are true:

• The child is:
  • Under age 18, or
  • Age 18 and did not provide more than half of their own support, or
  • Age 19–23, a full‑time student, and did not provide more than half of their own support
• The child has unearned income above the yearly threshold
• The child is required to file a tax return
• The child has at least one living parent at year‑end
• The child does not file a joint return

Earned income (such as wages) does not trigger the Kiddie Tax.

2026 Kiddie Tax Thresholds

For tax year 2026:

1. First $1,350 of unearned income
   – Not taxable (covered by the dependent standard deduction)
2. Next $1,350
   – Taxed at the child’s tax rate
3. Unearned income over $2,700
   – Taxed at the parents’ marginal tax rate

These thresholds are indexed for inflation and may change each year.

Forms Used

• Form 8615 – Tax for Certain Children Who Have Unearned Income
  Required when a child’s unearned income exceeds $2,700
• Form 1040 (Child’s Return)
  Form 8615 is attached to the child’s individual return

Who Pays the Kiddie Tax?

• The child files their own return
• The child pays the tax
• The parent’s tax rate is used to calculate tax on the child’s excess unearned income

* The parent does not include the child’s income on their return unless a special election is made.

Optional Election: Parent May Report Child’s Income

In limited situations, parents may choose to report the child’s income on their own return instead of filing a separate return for the child.

Form 8814 – Parents’ Election

This option is allowed only if all of the following apply:

• Child’s only income is interest and dividends
• Total income is less than $13,000
• No estimated tax payments were made in the child’s name
• No federal income tax was withheld from the child’s income
• The child is otherwise subject to Kiddie Tax rules

This is optional and may increase the parent’s tax.

Example

A 17‑year‑old dependent earns:

• $3,000 in interest income (unearned)
• $0 in earned income

Tax Treatment

• First $1,350 → Not taxed
• Next $1,350 → Taxed at child’s rate
• Remaining $300 → Taxed at parents’ rate using Form 8615

The child files their own Form 1040 with Form 8615 attached.

Where to Enter Form 8615 in TaxSlayer

Federal Section > Other Taxes > Form 8615 – Tax for Certain Children Who Have Unearned Income

Tips

• Form 8615 is required once unearned income exceeds the threshold.
• Form 8814 is optional, not required, and only applies to interest/dividends.