Is a tax return necessary for a child whose only income is $4,000 of unearned income?
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Yes, a tax return is necessary for a child whose only income is $4,000 of unearned income in 2025.
Legal Reasoning
1. Filing Requirement for Dependents with Unearned Income
For the 2025 tax year, the filing requirement for a dependent child with only unearned income (such as interest, dividends, or capital gains) is triggered if their unearned income exceeds $1,350.
- "A dependent must file a tax return if their unearned income totals more than $1,350 for the 2025 tax year".
- IRS Publication 501 (2024) and IRS Publication 929 (2021) confirm that the threshold for unearned income requiring a return is $1,300 for 2024 and $1,100 for 2021, and these amounts are adjusted for inflation each year.
2. Application to the Scenario
- The child’s only income is $4,000 of unearned income.
- $4,000 is well above the $1,350 threshold for 2025.
3. Kiddie Tax Considerations
- If a child’s unearned income exceeds $2,700 in 2025, the excess is subject to the "kiddie tax," which means the portion above $2,700 is taxed at the parents’ marginal tax rate, and Form 8615 must be attached to the child’s return.
- The child’s unearned income of $4,000 exceeds this threshold, so the kiddie tax rules apply.
4. Parent’s Election to Report Child’s Income
- Parents may elect to report a child’s unearned income on their own return using Form 8814 if the child’s only income is from interest, dividends, and capital gain distributions, and the total is less than $13,000 for 2025.
- If the parent does not make this election, the child must file their own return.
5. Summary Table from IRS
IRS Topic No. 553 and the Instructions for Form 8615 confirm:- If a child’s unearned income is more than $2,600 (2024) or $2,700 (2025), Form 8615 is required.
6. Conclusion
A child with $4,000 of unearned income in 2025 is required to file a tax return because the amount exceeds the filing threshold for unearned income for dependents ($1,350 for 2025). Additionally, because the unearned income exceeds $2,700, the child’s return must include Form 8615 to calculate the kiddie tax. Alternatively, if the parent is eligible and chooses to report the child’s income on their own return using Form 8814, the child would not need to file a separate return, but this is optional and may not always be advantageous.
In summary: Yes, a tax return is necessary for a child whose only income is $4,000 of unearned income in 2025.
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