How does the kiddie tax work with job income plus interest earnings?
I'm pretty confused about the whole kiddie tax situation, especially the +$450 rule when my daughter has different income types. She worked at the mall last year and made about $13,500, and then she also earned like $1,300 in interest from this savings account her grandparents set up for her years ago. I'm not sure how all this gets taxed now? Does the job income affect how we handle the interest income for tax purposes? She's still in high school and we claim her as a dependent. Thanks for any help you guys can give me on this! Tax season is coming up fast and I want to make sure we do this right.
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StarSeeker
The kiddie tax can definitely be confusing! Let me break this down for you. The kiddie tax applies to unearned income (like interest from savings accounts) for dependents under 19, or under 24 if they're full-time students. The first $1,250 of unearned income is exempt from the kiddie tax in 2025. The next $1,250 is taxed at the child's tax rate. Anything above $2,500 is taxed at the parent's rate. Your daughter's earned income from her job ($13,500) is taxed normally at her own tax rate. It doesn't trigger the kiddie tax. Her $1,300 in interest income would have the first $1,250 exempt from kiddie tax, and only the remaining $50 would be taxed at her own rate since it doesn't exceed the $2,500 threshold. These two types of income are handled separately. Her job income doesn't affect how the interest is taxed under the kiddie tax rules.
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Ava Martinez
•So wait, if my son has $3,000 in investment income this year but doesn't have a job, does that mean I have to pay taxes on the amount over $2,500 at MY tax rate? That seems unfair!
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StarSeeker
•Yes, if your son has $3,000 in unearned income and no earned income, the first $1,250 is exempt, the next $1,250 is taxed at your son's rate, and the remaining $500 (the amount over $2,500) would be taxed at your rate. The purpose of this rule is to prevent parents from shifting significant investment assets to their children just to take advantage of the children's lower tax rates. The IRS designed it specifically to close that loophole while still giving a reasonable allowance for modest amounts of unearned income.
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Miguel Ortiz
I've been in almost the exact same situation with my teenager! I was completely stuck on how to handle the different income streams until I used https://taxr.ai to analyze our documents. It took a deeper look at my son's W-2 from his lifeguard job and the 1099-INT from his savings account, then explained exactly how the kiddie tax applied in our situation. The tool walked me through the whole process and showed me which forms we needed to fill out, especially how to properly report both the earned and unearned income. It even highlighted some deductions we could take related to his job that I hadn't considered!
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Zainab Omar
•Does it actually work for complex situations? My daughter has income from babysitting (cash, no W-2), some stock her grandpa gave her that pays dividends, and a small YouTube channel that generates ad revenue. Would taxr.ai handle all that?
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Connor Murphy
•I'm a bit skeptical about automated tools for this kind of thing. Does it give actual advice or just general information? I've been burned before by tax software that couldn't handle these special situations.
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Miguel Ortiz
•It absolutely handles complex situations. The system analyzes all types of income sources and classifies them correctly as earned vs. unearned income. For your daughter's babysitting income, it would guide you through reporting that properly as self-employment income, while separately addressing the dividend income under kiddie tax rules. The tool provides specific advice tailored to your exact situation, not just general information. It creates a detailed analysis of which tax rules apply to each income stream and how they interact. Unlike basic tax software that gets confused with special cases, taxr.ai specializes in unusual tax situations and explains everything in plain language.
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Zainab Omar
I wanted to follow up about using taxr.ai that I asked about earlier - I finally tried it with my daughter's complicated income situation (babysitting, dividends, YouTube) and it was seriously helpful! It properly separated her earned income from the babysitting (explained how to report it without W-2s) from her unearned dividend income that fell under kiddie tax rules. It even correctly identified that her YouTube income was considered self-employment income and showed us the specific forms needed. The system flagged that only a small portion of her dividend income would trigger the kiddie tax at my rate, saving us quite a bit. Definitely worth checking out if you're dealing with the kiddie tax situation!
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Yara Sayegh
If you're struggling to get answers about the kiddie tax, I feel your pain! I spent WEEKS trying to call the IRS for clarification last year. I'd wait on hold for hours only to get disconnected. Finally found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how the kiddie tax applied to my son's situation (he had both job income and some investments). They explained which forms I needed and how to report everything correctly to avoid issues. Completely changed my view on getting help directly from the IRS.
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NebulaNova
•How does Claimyr actually work? Do they just call the IRS for you or what? I'm confused about what the service actually does.
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Connor Murphy
•Yeah right. I've tried EVERYTHING to get through to the IRS and nothing works. I find it hard to believe this service can magically get you to the front of the line when millions of people are trying to call. Sounds too good to be true.
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Yara Sayegh
•They don't call the IRS for you - they hold your place in line and then call you back when they're about to connect with an IRS agent. It's basically an automated system that navigates the IRS phone tree and waits on hold so you don't have to. When an agent is about to come on the line, you get a call to join the conversation. I was skeptical too, which is why I shared the video link. I had tried calling the IRS at least 7 times before this, always getting disconnected after an hour+ on hold. With Claimyr, I just entered my number, they called me back about 20 minutes later, and suddenly I was talking to an actual IRS agent who answered all my kiddie tax questions. It works because they have a system optimized for navigating the IRS phone system efficiently.
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Connor Murphy
OK I need to eat crow here. After complaining about Claimyr sounding "too good to be true" in my previous comment, I was desperate enough to try it. I've been trying to get clarification on my daughter's kiddie tax situation for weeks with no luck. I used the service yesterday and got connected to an IRS agent in about 35 minutes (not quite the 20 minutes advertised but WAY better than my previous attempts). The agent actually gave me detailed guidance on how to report my daughter's mixed income and confirmed that I was calculating the kiddie tax threshold correctly. They even emailed me the specific forms I needed afterward. Guess I was wrong to be so skeptical! Sometimes things actually do work as advertised.
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Keisha Williams
Quick question about the kiddie tax - does it matter if the child files their own return vs. the parent including the child's income on their return? My son is 16 and had about $2,700 in interest and dividends last year, plus $4,000 from a summer job.
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Paolo Conti
•Your son will need to file his own return. When a dependent has earned income (his $4,000 from the summer job), they must file their own return if they're required to file at all. For the unearned income ($2,700), since it's over $2,500, part of it will be taxed at your rate, but it's still reported on his return using Form 8615. You can't include it on your return in this case.
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Keisha Williams
•Thanks for explaining this! So just to be sure I understand: he files his own return, but we use Form 8615 to calculate the tax on the portion of his unearned income that exceeds $2,500 (so $200 in this case) using our tax rate? And the rest of his income (both earned and unearned below the threshold) is just taxed normally at his rate?
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Paolo Conti
•That's exactly right. He'll file his own return reporting both income types. The $4,000 job income is taxed at his rate. For the unearned income: first $1,250 is not taxed, next $1,250 is taxed at his rate, and only the remaining $200 is taxed at your rate using Form 8615. Form 8615 will walk you through this calculation and will require information from your tax return to determine the appropriate tax on that $200. This ensures the $200 is taxed at your marginal rate rather than his presumably lower rate.
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Amina Diallo
Does anyone know if college funds count for kiddie tax? My daughter has a 529 plan and took out $5k for college expenses this year. She also made $12k working part-time.
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Oliver Schulz
•Qualified distributions from a 529 plan that are used for qualified education expenses are generally tax-free, so they don't trigger the kiddie tax. They're not even considered income for tax purposes if used properly. Your daughter's $12k from working would be earned income taxed at her rate. So in your case, you shouldn't have to worry about the kiddie tax at all assuming the 529 withdrawals were used for qualified expenses.
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Daniela Rossi
Just wanted to add some clarification about the standard deduction for your daughter's situation. Since she has both earned income ($13,500) and unearned income ($1,300), she can claim the standard deduction against her total income. For 2024, a dependent's standard deduction is the greater of $1,300 or their earned income plus $400 (up to the regular standard deduction amount). In your daughter's case, her standard deduction would be $13,900 ($13,500 earned income + $400). This means most of her income would be covered by the standard deduction anyway. The kiddie tax calculation on her $1,300 interest would still apply as StarSeeker explained, but the actual tax impact might be minimal once you factor in her standard deduction. Make sure to check if she had any taxes withheld from her job - she might actually be due a refund even with the small amount of kiddie tax on the interest income over $1,250.
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