Author Topic: When can kids file taxes as regular adult? (avoid kiddie tax)  (Read 1379 times)

EricEng

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When can kids file taxes as regular adult? (avoid kiddie tax)
« on: December 31, 2019, 09:55:05 AM »
So kiddie tax rules&rates are pretty rough and I know I have to work with them if I, the parent, claims them as dependents while they are under 19 (or 24 for students).  Is there an age before 18 the child can start filing as an adult if I don't claim them?  IE: I give up my $2,000 child tax credit by not claiming them, but they can now realize capital gains up to ~$39,000 at 0% (effectively a $6,000 tax credit by avoiding 15% on $40k cap gains)

I've google ninjaed all over, but all I find are resources on qualifying to claim a dependent and nothing on what age someone can qualify to file as a regular adult.

MDM

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Re: When can kids file taxes as regular adult? (avoid kiddie tax)
« Reply #1 on: December 31, 2019, 11:14:42 AM »
I've google ninjaed all over, but all I find are resources on qualifying to claim a dependent and nothing on what age someone can qualify to file as a regular adult.
That's because there are only five filing status options: single (S), married filing jointly (MFJ), married filing separately (MFS), Head of Household (HOH), and Qualifying Widow/Widowe (QW).  There is no distinction based on age if a person is not someone else's dependent for filing purposes.

If the child is under 19 (or 24 and a "full time" student), lives with you, etc., but makes a lot of money, the child can be your "qualifying child" for the Earned Income Credit but not be your dependent. 

Being a dependent is, however, not a factor in determining whether the kiddie tax applies.  From https://www.irs.gov/pub/irs-pdf/i8615.pdf:
Quote
Form 8615 must be filed for anyone who meets all of the following conditions.
1. You had more than $2,200 of unearned income.
2. You are required to file a tax return.
3. You were either:
    a.  Under age 18 at the end of 2019,
    b.  Age 18 at the end of 2019 and didn’t have earned income that was more than half of your support, or
    c.  A full-time student at least age 19 and under age 24 at the end of 2019 and didn’t have earned income that was more than half of your support.
        (Earned income is defined later. Support is defined below.)
4. At least one of your parents was alive at the end of 2019.
5. You don’t file a joint return for 2019.

These rules apply if you’re legally adopted or a stepchild. These rules also apply whether or not you’re a dependent. These rules don’t apply if neither of your parents were living at the end of the year.

EricEng

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Re: When can kids file taxes as regular adult? (avoid kiddie tax)
« Reply #2 on: December 31, 2019, 11:22:54 AM »
Being a dependent is, however, not a factor in determining whether the kiddie tax applies.  From https://www.irs.gov/pub/irs-pdf/i8615.pdf:
Quote
Form 8615 must be filed for anyone who meets all of the following conditions.
1. You had more than $2,200 of unearned income.
2. You are required to file a tax return.
3. You were either:
    a. Under age 18 at the end of 2019,
    b.  Age 18 at the end of 2019 and didn’t have earned income that was more than half of your support, or
    c.  A full-time student at least age 19 and under age 24 at the end of 2019 and didn’t have earned income that was more than half of your support.
        (Earned income is defined later. Support is defined below.)
4. At least one of your parents was alive at the end of 2019.
5. You don’t file a joint return for 2019.

These rules apply if you’re legally adopted or a stepchild. These rules also apply whether or not you’re a dependent. These rules don’t apply if neither of your parents were living at the end of the year.
Thanks, that's exactly what I was trying to figure out.  So doesn't matter if they file as "single" and aren't claimed as a dependent, they still get hit because they are under 18 and I'm alive.  Guess I need to get my toddler married to friend's toddler so they can do some joint returns!

EricEng

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Re: When can kids file taxes as regular adult? (avoid kiddie tax)
« Reply #3 on: December 31, 2019, 01:05:41 PM »
Anyone found a good way of calculating kiddie tax?  It seems there are multiple ways to calculate and compare.  I used 8615 form
https://www.irs.gov/pub/irs-pdf/f8615.pdf
and worksheet MDM linked above:
 https://www.irs.gov/pub/irs-pdf/i8615.pdf
Along with standard 1040 and found that if you go over the $2200 exclusion by $1 with capital gains of $2201 you end up with like a $105 tax bill which seems wrong.  However, it says you can also calculate using Capital Gains forms and it might be lower, although that one gets complicated.

In my circumstance it looks like I went over $2200 limit by about $500 this year.
« Last Edit: December 31, 2019, 01:07:15 PM by EricEng »