For children under age 14, investment income over $1,500 is taxed at the parent's rate if the parent's rate is higher than
the child's. If the
child's investment income is more than $1,500, use Form 8615 to figure the child's tax.
For Form 8615, “investment income” includes all taxable income other than earned income as defined on this page. Investment income includes
taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also
includes taxable social
security benefits, pension and annuity income, and income (other than earned income) received as the beneficiary of a trust.
Form 8615 must be filed for any child who meets the following conditions.
- The child was under age 14 at the end of 2003. A child born on January 1, 1990, is considered to be age 14 at the end of 2003.
- At least one of the child's parents was alive at the end of 2003.
- The child had more than $1,500 of investment income.
- The child is required to file a tax return.
Note:
The parent may be able to elect to report the child's interest, ordinary dividends, and capital gain distributions on the
parent's return. If the
parent makes this election, the child will not have to file a return or Form 8615. However, the Federal income tax on the
child's income, including
qualified dividends and capital gain distributions, may be higher if this election is made. For more details, see Form 8814,
Parents' Election To Report Child's Interest and Dividends.
For more details, see Pub. 929, Tax Rules for Children and Dependents.
Incomplete Information for Parent or Other Children
If the parent's taxable income or filing status or the net investment income of the parent's other children is not known by
the due date of the
child's return, reasonable estimates may be used. Enter “Estimated” next to the appropriate line(s) of Form 8615. When the correct information is
available, file Form 1040X, Amended U.S. Individual Income Tax Return.
Instead of using estimates, the child may be able to get an automatic 4-month extension of time to file. For details, see
Form 4868,
Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
If after the child's return is filed the parent's taxable income changes or the net investment income of any of the parent's
other children
changes, the child's tax must be refigured using the adjusted amounts. If the child's tax changes, file Form 1040X to correct
the child's tax.
A child whose tax is figured on Form 8615 may owe the alternative minimum tax. For details, see Form 6251, Alternative Minimum
Tax—Individuals, and its instructions.
