As parents, we encourage our children to work so they can learn important values about work and independence. At what point, if at all, do children need to file an income tax return for the money they earn?
The IRS does not exempt anyone from the requirement to file a tax return based on age, even if your child is declared as an independent on your tax return.
Your dependent children must file a tax return when they earn above a certain amount of income.
Dependent children with earned income (that is, income from a job or self-employment) in excess of $12,000 must file an income tax return.
Dependent children with unearned income (interest, dividends, capital gains, etc.) of more than $1,050 must also file a return. And if the dependent child’s earned and unearned income together total more than the larger of $1,050 or a total of earned income up to $12,000 + $350.
Here’s an example. Kyle is a 20-year old college student who’s claimed as a dependent by his parents. He received $400 I unearned income and $5,500 for a part-time job on campus. He does not have to file a tax return because both his unearned and earned income fall below the thresholds. Kyle’s total income if $5,900 is less than his total earned income + $350.
If you decide to prepare a separate tax return for your child, the same reduced standard deduction rules detailed above will apply.
These thresholds are subject to change, so please consult a professional with tax expertise regarding your individual situation.