Is there any reason to claim child's unearned income on your tax return?

[milliemchi]

I just finished looking over the IRS' instructions on filing taxes for minors/dependents. One of the options is to include the child's unearned income (think dividends from an investment account) on the parents' tax return. Looking at the list of consequences, they all seem to point to higher tax paid, as there may be a higher tax rate, and some deductions can not be claimed. Why would anyone choose to do that? Do some people really value simplicity that much? It doesn't even seem that much simpler. Am I missing something? Thanks.

[secondcor521]

As far as I know, yes, it's for the sake of simplicity to avoid filling out the extra return, making a copy, using an envelope/stamp, etc.

I had a related situation one year where my three kids each had capital losses they needed to file for.  Since I am cheap, I filled out, copied, and mailed eight paper tax returns, which was kind of a pain compared to the two I normally do.  Also in my state they assess $10 for each tax return filed, so it cost me $30 extra to pay the $1 per kid income tax owed.

[MDM]

The child doesn't have to file at all if the income is low enough (there are separate limits for earned and unearned).

If yours doesn't have to file at all, then the answer to your question is likely either "no" or, "yes, if you want to pay more in taxes than you are legally required to pay."

There may be some arcane situation involving ACA credit eligibility, etc., but....