Words you may need to know (see Glossary):
- Adjusted gross income
- Adjustments to income
- Alternative minimum tax
- Capital gain distribution
- Dependent
- Earned income
- Filing status
- Gross income
- Investment income
- Itemized deductions
- Net capital gain
- Net investment income
- Standard deduction
- Tax year
- Taxable income
- Unearned income
Two special rules apply to the tax on certain investment income of
a child under age 14.
- If the child's interest, dividends, and other investment
income total more than $1,400, part of that income may be taxed at the
parent's tax rate instead of the child's tax rate. (See Tax for
Children Under Age 14 Who Have Investment Income of More Than $1,400,
later.)
- The child's parent may be able to choose to include the
child's interest and dividend income (including capital gain
distributions) on the parent's return rather than file a return for
the child. (See Parent's Election To Report Child's Interest and
Dividends, later.)
For these rules, the term "child" includes a legally adopted
child and a stepchild. These rules apply whether or not the child is a
dependent.
These rules do not apply if:
- The child is not required to file a tax return (see
Filing Requirements in Part 1), or
- Neither of the child's parents were living at the end of the
tax year.
Which Parent's
Return To Use
If a child's parents are married to each other and file a joint
return, use the joint return to figure the tax on the investment
income of a child under 14. For parents who do not file a joint
return, the following discussions explain which parent's tax return
must be used to figure the tax. Only the parent whose tax return is
used can make the election described under Parent's Election To
Report Child's Interest and Dividends. The tax rate and other
return information from that parent's return are used to compute the
child's tax as explained later under Tax for Children Under Age
14 Who Have Investment Income of More Than $1,400.
Parents are married.
If the child's parents file separate returns, use the return of the
parent with the greater taxable income.
Parents not living together.
If the child's parents are married to each other but not living
together, and the parent with whom the child lives (the custodial
parent) is considered unmarried, use the return of the custodial
parent. If the custodial parent is not considered unmarried, use the
return of the parent with the greater taxable income.
For an explanation of when a married person living apart from his
or her spouse is considered unmarried, see Head of Household
in Publication 501.
Parents are divorced.
If the child's parents are divorced or legally separated, and the
parent who had custody of the child for the greater part of the year
(the custodial parent) has not remarried, use the return of the
custodial parent.
Custodial parent remarried.
If the custodial parent has remarried, the stepparent (rather than
the noncustodial parent) is treated as the child's other parent.
Therefore, if the custodial parent and the stepparent file a joint
return, use that joint return. Do not use the return of the
noncustodial parent.
If the custodial parent and the stepparent are married, but file
separate returns, use the return of the one with the greater taxable
income. If the custodial parent and the stepparent are married but not
living together, the earlier discussion under Parents not living
together applies.
Parents never married.
If a child's parents did not marry each other, but lived together
all year, use the return of the parent with the greater taxable
income. If the parents did not live together all year, the rules
explained earlier under Parents are divorced apply.
Widowed parent remarried.
If a widow or widower remarries, the new spouse is treated as the
child's other parent. The rules explained earlier under Custodial
parent remarried apply.
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