how do you report div on kids' custodial accts.?

[DeniseNJ]

First, I have Vanguard taxable accounts for both my kids under both our names--custodial brokerage accts (UTMA).  Kids are 17 and 20.  So I get 1099-DIV for each.  In FeeTaxUSA, i entered the info as a 1099div for me, since the options were only for me or DH.  Is that right or should these earnings be taxed at a different rate? 

total was 186, qualified was 174 and sections 199A div (whatever that means) was 11 bucks.  I thought we'd pay taxes on the 11 but it seems the used the total to add to our earnings.

[terran]

total was 186, qualified was 174 and sections 199A div (whatever that means) was 11 bucks.  I thought we'd pay taxes on the 11 but it seems the used the total to add to our earnings.

I don't know about the custodial account aspect, but if you do pay the tax (rather than your kids), then you'll pay at your long term capital gains rate (15% given the income you mentioned in the other thread) on the $174 qualified dividends, your marginal ordinary income tax rate (24%) on the $186 - $174 = $12 non-qualified dividends, and the $11 199A dividend will actually get you a 20% deduction ($2) since that your portion of the new Qualified Business Income deduction on any pass through businesses owned by your index funds (common in REITs, but all market funds like VTSAX invest in a few such businesses too).

[DeniseNJ]

Yes, I did see that 2 bucks somewhere on the form.  Yea

But if they "own" the dividends, I owuld think they would pay at their rate wichih is lower?

This didn't used to be a problem before MMM--we never saved anything!

[secondcor521]

First, I have Vanguard taxable accounts for both my kids under both our names--custodial brokerage accts (UTMA).  Kids are 17 and 20.  So I get 1099-DIV for each.  In FeeTaxUSA, i entered the info as a 1099div for me, since the options were only for me or DH.  Is that right or should these earnings be taxed at a different rate? 

total was 186, qualified was 174 and sections 199A div (whatever that means) was 11 bucks.  I thought we'd pay taxes on the 11 but it seems the used the total to add to our earnings.

Since they are UTMAs, in the IRS's eyes the income is your children's and usually would be reported on your children's tax returns if they were required to file.  You can check this by looking at the SSN on the 1099-DIV; it will be your kids' SSN's, not yours.  You should not report it on your return.

If their total investment income was over $2,200 in 2019 - sounds like it wasn't - then they would be subject to the "Kiddie Tax" rules and pay taxes at your rate.  See Form 8615:  https://www.irs.gov/pub/irs-pdf/f8615.pdf

If their total investment income was under $11,000 in 2019 - sounds like it was - then you could *elect* to report their income on your return.  But I don't know why you would, since putting it on their returns would probably result in zero taxes and possibly not even be required to file a return, whereas adding it to yours would probably increase your taxes.

Section 199A dividends only reduce taxes; it does not increase them.  It is to your advantage to enter the data into your tax prep program as you might receive a deduction of up to 20% of the Section 199A amount.

[DeniseNJ]

First, I have Vanguard taxable accounts for both my kids under both our names--custodial brokerage accts (UTMA).  Kids are 17 and 20.  So I get 1099-DIV for each.  In FeeTaxUSA, i entered the info as a 1099div for me, since the options were only for me or DH.  Is that right or should these earnings be taxed at a different rate? 

total was 186, qualified was 174 and sections 199A div (whatever that means) was 11 bucks.  I thought we'd pay taxes on the 11 but it seems the used the total to add to our earnings.

Since they are UTMAs, in the IRS's eyes the income is your children's and usually would be reported on your children's tax returns if they were required to file.  You can check this by looking at the SSN on the 1099-DIV; it will be your kids' SSN's, not yours.  You should not report it on your return.

If their total investment income was over $2,200 in 2019 - sounds like it wasn't - then they would be subject to the "Kiddie Tax" rules and pay taxes at your rate.  See Form 8615:  https://www.irs.gov/pub/irs-pdf/f8615.pdf

If their total investment income was under $11,000 in 2019 - sounds like it was - then you could *elect* to report their income on your return.  But I don't know why you would, since putting it on their returns would probably result in zero taxes and possibly not even be required to file a return, whereas adding it to yours would probably increase your taxes.

Section 199A dividends only reduce taxes; it does not increase them.  It is to your advantage to enter the data into your tax prep program as you might receive a deduction of up to 20% of the Section 199A amount.

Thanks so much.  They have no other income bc believe it or not, neither has ever worked a day in their lives.

[secondcor521]

Right.  I was allowing for the possibility of summer jobs.

If they're not earning income, there's a strong possibility that you could claim them as dependents on your tax return and get either the Child Tax Credit ($2000) (under age 17 at the end of 2019, possibly applies to your younger child) or the Other Dependent Tax Credit ($500) (17 or over, possibly applies to both of your children).

There are other rules and restrictions on those credits, but they're worth checking into.

See https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent for a resource.