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.

💰 2025 Kiddie Tax Thresholds

For tax year 2025:

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.