Parents may assume that if their child is claimed as a dependent, they are not required to file a tax return. However, that is not always the case. The IRS sets specific income thresholds and criteria that determine whether a dependent child must file. Understanding these rules can help everyone stay compliant.
When a Dependent Child Must File
A child who is claimed as a dependent on a tax return may be required to file their own federal income tax return if their income exceeds certain limits. Requirements depend on the type of income the child receives: earned income, unearned income, or a combination of both.
- Earned income includes but not limited to wages, salaries, and tips from a job, in addition to self-employment income.
- Unearned income includes but not limited to interest, dividends, and capital gains.
Filing Thresholds:
For the 2025 tax year (returns filed in 2026), a dependent child generally must file a return if any of the following are relevant:
- Earned income exceeds approximately $15,750
- Unearned income exceeds $1,350
- Combined earned and unearned income exceeds the greater of $1,350 or earned income plus $450
These thresholds are tied to the dependent standard deduction and filing rules. In many cases, income below the stated amounts will not create federal income tax liability. However, special taxes and other filing triggers may apply. For example, a dependent child must file if they owe self-employment tax. Self-employment tax is triggered when self-employment income is at least $400. On the other hand, a dependent may want to file even if they are not required to file. For instance, if a dependent had tax withheld and is due a refund, the dependent may consider filing a return to claim the overpayment.
Special Considerations for Investment Income (“Kiddie Tax”)
If a dependent child has investment income, “kiddie tax” may be a consideration. The intent of kiddie tax, in part, was to address shifting taxable income from the parents to their children for a tax benefit. Kiddie tax applies to children under age 19 (or under 24 if a full-time student) and taxes unearned income above a certain threshold at the parents’ tax rate. For 2025 and 2026, the kiddie tax works as follows (assuming the child only has unearned income):
- The first $1,350 of unearned income is not taxable (covered by the standard deduction).
- The next $1,350 is taxed at the child’s marginal tax rate.
- Anything above $2,700 is taxed at the parent’s marginal tax rate, which is often higher than the dependent’s marginal rate.
If the child only has unearned income from interest, dividends, and capital gain distributions and the income is under $13,500, the parents have the option to have the dependent’s income taxed at their marginal rate. The election to include the dependent’s unearned income is reported on Form 8814. Some may use this option for administrative ease (not having to file two tax returns). Factors preventing the parents from making the election include the dependent having income other interest, dividends, and capital gain distributions, the dependent having estimated tax payments (including prior year overpayments applied), and the dependent having backup withholding.
Documentation and Good Recordkeeping
If a dependent child has income, it is important to maintain proper documentation, such as W-2 forms from jobs and 1099s from financial institutions. Accurate recordkeeping ensures that any required filing is completed correctly and reduces the risk of IRS issues.
How We Can Help
Determining whether a dependent child must file can be more complex than it appears, especially when multiple income sources or tax rules apply. The professionals at Gilliam Bell Moser can help you evaluate your child’s situation, identify filing requirements, and determine the best strategy that may minimize your overall family tax burden.
This article is not intended as tax advice.
