Parents' Election To Report Child's Interest and Dividends - Form 8814

Parents can elect to include a child’s income on the parent’s return (Form 8814) when a child’s only income is interest, dividends or capital gain distributions. If making this election, the child does not have to file a return. The child must meet the following conditions to qualify:

• At the end of the year, must be younger than age 19 or a full-time student younger than age 24
• Must have gross income of less than $10,500
• Must be required to file a return unless the election is made
• Must not file a joint return for the year
• Must not have made estimated tax payments for the tax year, and no overpayment from the previous year can apply to the tax year under his name and Social Security number
• Must not have any federal income tax taken out of his income under the backup withholding rules

If you elect to report your child’s income on your return, you cannot take certain deductions that your child could take on his or her own return such as:
• Additional standard deduction of $1,550 if the child is blind, 
• Penalty on early withdrawal of child’s savings, and
• Itemized deductions such as the child’s investment expenses or charitable contributions. 

If your child received qualified dividends or capital gain distributions, you may pay up to $105 more tax if you make this election instead of filing a separate tax return for the child. This is because the tax rate on the child’s income between $1,050 and $2,100 is 10% if you make this election. However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions.

Form 8814