Child earned income this year - Can I still claim them as a dependent for taxes?
Title: Child earned income this year - Can I still claim them as a dependent for taxes? 1 My 4-year-old daughter has somehow managed to earn around $40,000 this year from a children's modeling contract. I was completely shocked by how much money she's bringing in, and now I'm confused about our tax situation. Looking at her paystubs, there's a lot of money being withheld for taxes, so I assume she'll need to file her own tax return this year. My question is whether we can still claim her as a dependent on our taxes? She's only 4 years old and obviously still lives with us. We provide most of her housing, food, clothing, etc. But I've heard there might be income limits for claiming dependents, and I'm not sure if her earnings would disqualify her from being our dependent. Is there an income threshold where you can't claim children as dependents anymore, even when they're so young?
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Sofia Gutierrez
7 You can absolutely still claim your 4-year-old as a dependent! The IRS has specific tests for qualifying children, and income only matters for one aspect of it. For a qualifying child, there are five tests: relationship, age, residency, support, and joint return. Since she's your daughter, under 19, lives with you, and won't file a joint return, the only question is the support test. The support test asks who provides more than 50% of the child's support - not how much they earn. So even if your child earned $40k, as long as that money isn't being used to provide more than half of her own support (housing, food, clothing, medical expenses, etc.), you can still claim her. Your daughter will need to file her own tax return because her earned income is above the standard deduction ($13,850 for 2024), but that doesn't affect your ability to claim her as a dependent at all. The only income test applies to qualifying relatives, not qualifying children.
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Sofia Gutierrez
•15 This is really helpful! But I'm a bit confused - if we're claiming her as dependent, does that change how she files her own taxes? Does she check some box that says "someone can claim me as dependent" or something? And does this affect her tax rates or deductions?
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Sofia Gutierrez
•7 Yes, your daughter will need to check the box on her tax return that indicates she can be claimed as a dependent on someone else's return. This is important because it affects her standard deduction for unearned income (like interest from a savings account). For earned income like her modeling payments, she can still claim the full standard deduction even when being claimed as your dependent. Her tax rates will be the same as anyone else with that income level. The main limitation is that she can't claim certain credits like the Earned Income Credit if she's being claimed as a dependent on your return.
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Sofia Gutierrez
12 Just wanted to share my experience with this! My son was in a similar situation with acting gigs, and I was so confused about the tax implications. I found this tool called taxr.ai (https://taxr.ai) that walks you through dependent questions specifically for child performers and high-income children. It asks questions about who provides support, where the money is held, etc. and gives super clear guidance. What I found most helpful was that it explained the "support test" in real numbers - basically I had to calculate what portion of my kid's total expenses (housing, food, medical, etc.) was provided by me vs. paid from his earnings. Since most of his money went into savings and not toward his living expenses, we passed the support test and could claim him as dependent. The site also helped me understand how to properly report his income and our dependent status.
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Sofia Gutierrez
•19 That sounds helpful, but how detailed do you have to get with the support calculations? Like do I need to track every dollar spent on my kid's food and clothes? And did they help figure out if you need to pay self-employment taxes for a child performer?
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Sofia Gutierrez
•9 Does this tool actually prepare your taxes or just give information? My daughter earned about $25k from competitive gaming tournaments (she's 16) and I'm completely lost about how to handle everything.
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Sofia Gutierrez
•12 You don't need to track every single dollar, but you should have a reasonable estimate of major expenses. I calculated rough monthly costs for housing (portion of mortgage/utilities), food, clothing, medical care, and education for my son, then compared that total to what was actually spent from his earnings. As long as you're providing more than half, you're good! The tool doesn't prepare your taxes itself, but it gives you specific guidance on what forms you need and how to fill them out. For your daughter's gaming tournaments, it would definitely help clarify if those are considered self-employment (which might require Schedule C and self-employment tax) or prize winnings (reported differently). It really simplified what I thought would be a complicated situation.
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Sofia Gutierrez
9 Update: I tried out taxr.ai after posting my question about my daughter's gaming tournament income, and it was super helpful! It confirmed that we can claim her as a dependent since the tournament money went into a college fund and wasn't used for her support. The best part was their explanation of how to handle the tournament winnings - turns out they're considered "other income" not self-employment in our case, which saved us a bunch on self-employment taxes. It even generated a checklist of exactly what forms we needed and which boxes to check. Way less stressful than trying to piece together info from random websites!
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Sofia Gutierrez
22 If your child is filing their own tax return, you might face issues if they need to call the IRS with questions about their filing (which is common with first-time filers). I had this problem with my teenage son's first job, and it was IMPOSSIBLE to get through to the IRS. After trying for weeks, I found this service called Claimyr (https://claimyr.com) that got us connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c With child performers especially, there are often specific questions about withholding that the standard tax software doesn't cover well. Having an actual IRS agent explain exactly how to report everything correctly and confirm we were handling the dependent situation properly gave us huge peace of mind. They were able to verify that yes, we could claim our son as a dependent despite his income, and explained exactly how he should file his separate return.
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Sofia Gutierrez
•15 Wait, is this legit? How does it work - do they just call the IRS for you or something? I've tried calling the IRS three times about my daughter's situation and always gave up after being on hold for over an hour.
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Sofia Gutierrez
•11 Sounds like a scam to me. Nobody can magically get through to the IRS faster than anyone else. They probably just put you on hold themselves and charge you for the privilege.
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Sofia Gutierrez
•22 It's completely legitimate - they don't call the IRS for you. They use a system that navigates the IRS phone tree and holds your place in line, then calls you when they're about to connect with an agent. I was skeptical too until I tried it. I've spent countless hours trying to get through on my own, but their system knows exactly when call volume is lowest and uses technology to maximize your chances of getting through. It saved me from having to sit on hold for hours while still trying to work my day job. They only charge if they actually connect you with an IRS agent.
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Sofia Gutierrez
11 I have to admit I was completely wrong about Claimyr. After dismissing it as a probable scam, I was desperate enough to try it when I couldn't get answers about my son's tax situation anywhere else. Got connected to an IRS representative in about 20 minutes when I'd previously waited on hold for 2+ hours and given up. The agent confirmed that my son's YouTube income (about $35k last year) requires him to file his own return, but we can absolutely still claim him as our dependent since he's 13 and we provide over half his support. They also walked me through exactly how to document everything properly so we don't trigger any audit flags with a child having substantial income. Definitely worth it for the peace of mind alone.
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Sofia Gutierrez
18 Just to add another perspective - the support test is what matters here, not income. My daughter made almost $50k last year at 17 from her online business, but since she wasn't using that money for her own support (most went to college savings), we still claimed her as dependent. We documented everything carefully just in case of audit. Make sure your daughter's employer is withholding correctly. Child performers sometimes have special rules depending on your state, and some states require part of their earnings to go into a protected account (similar to the "Coogan Law" in California).
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Sofia Gutierrez
•3 Did you have to fill out any special forms to document the support calculation? I've been trying to figure out if there's an official worksheet or something for this. My son made about $32k from gaming tournaments this year.
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Sofia Gutierrez
•18 There's no specific IRS form for the support calculation, but I created a simple spreadsheet showing the total cost of my daughter's support (housing, food, education, medical, clothing, etc.) and what portion I paid versus what was paid from her earnings. I kept receipts for major expenses just in case. For your son's gaming tournaments, make sure you understand if they're considered prizes/awards (reported on Line 8 of Schedule 1) or self-employment income (Schedule C) - they're treated differently for tax purposes. In my daughter's case, her online business income required Schedule C and self-employment tax, which was a big surprise our first year dealing with it.
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Sofia Gutierrez
14 Has anyone dealt with the kiddie tax in this situation? I've heard if your child has unearned income (interest, dividends, etc.) over a certain amount, it gets taxed at the parent's rate. Is that something to worry about with high-earning child performers?
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Sofia Gutierrez
•7 Good question! The kiddie tax only applies to unearned income (investment income, interest, dividends, capital gains) - not to earned income like modeling or acting wages. If your child performer is just earning wages, the kiddie tax doesn't apply at all. However, if they're earning enough that you're investing some of that money and generating significant investment income, then the kiddie tax could come into play. For 2024, the first $1,250 of unearned income is tax-free, the next $1,250 is taxed at the child's rate, and anything above $2,500 in unearned income would be taxed at the parent's rate.
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