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Tax Filing Requirements for Children

Updated for Tax Year 2021 • July 19, 2022 11:02 AM


OVERVIEW

The IRS requires that all taxpayers file a tax return, regardless of age.


Young mom cuddling with laughing toddler girl

The Internal Revenue Service requires all taxpayers, regardless of age, to file a tax return and pay the appropriate income tax in any year their gross income exceeds certain levels. This requirement extends to the children you claim as dependents. However, unlike adult taxpayers, children have more flexibility in choosing how to comply.

Dependent children

Your dependent children need to submit tax returns if they earn certain amounts of income during the year. Different filing rules apply to children and even small amounts of income may require a return.

Taxpayers claimed as dependents have different filing requirements than those that are not claimed as dependent so you should ensure that your child is eligible to be your dependent. The tax rules typically allow you to claim a credit for a dependent child if they reside with you for more than half the year, don’t provide more than half of their own financial support, and are under the age of 19 at all times during the tax year, or under 24 if a full-time student.

If your child lives outside of the home because they are away at school or due to another temporary absence, you can still claim them as a dependent as long as they meet all of the other requirements of being your dependent.

Your child's earned income

Unlike other taxpayers, the IRS treats your dependent child differently depending on whether they earn money from work or through investments. Dependent children who have earned income of more than $12,550 of income in 2021 typically need to file a personal income tax return and might owe tax. Earned income applies to wages and salaries your child receives as a result of providing services to an employer or from self-employment, even if only through a part-time job.

However, even if your child earns less than $12,550 during 2021, it may be a good idea to file a tax return for them. They could be eligible for a tax refund if they had income tax withheld form their paycheck. Regardless of the amount of income your dependent child earns, their standard deduction is typically different than yours. It is limited by the larger of $1,100 or their earned income plus $350, with the maximum equal to the standard deduction for single taxpayers which is $12,550 for 2021.

Your child's investment income

The rules for filing a tax return change when your dependent child receives income from sources other than employment, such as investment income including interest and dividend payments. When the 2021 total of this type of income exceeds $1,100, then a return needs to be filed for your dependent child.

If your dependent child’s unearned income only consists of interest and dividends, then you can elect to include it on your own return and combine it with your income. Do this by completing IRS Form 8814 and attaching it to your personal tax return (TurboTax will do this for you).

However, depending on the level of your income, making this election may result in higher income tax than if you prepare a separate return for your child. This is because it could push you into a higher tax bracket, where higher tax rates may apply. If you decide to prepare a separate return for your child, the standard deduction rules detailed above will apply.

Filing your child's tax return

The responsibility for filing a dependent child’s tax return rests with the child if they are capable of doing so. If they are not old enough to understand how to prepare a tax return, then it becomes the parent's responsibility to file it for them or to include the income on the parent's tax return.

If you do prepare the return, you can also sign it for your child if they are unable to do so. However, you need to include your own signature and a notation that you are signing for the child as the parent or guardian. Signing your child’s return also allows you to discuss it with the IRS in the event there are questions later on.

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