How to Report Interest on Minor Child's CD When Filing Taxes

This is actually a common question for parents with financially savvy kids! You have two options for reporting your children's unearned income (like interest from CDs): First option: File Form 8814 (Parents' Election to Report Child's Interest and Dividends) with your return, which allows you to include your children's interest income on your own return. The advantage is you don't need to file separate returns for your kids. In FreeTaxUSA, you should look under "Miscellaneous" or "Other Income" sections - there should be an option for "Child's Interest and Dividends." Second option: File separate returns for each child. This might be better if their income exceeds certain thresholds, but given the small amounts you mentioned, the first option is likely simpler. Just note that if you include their income on your return using Form 8814, it might slightly increase your AGI, which could affect certain deductions or credits that have income limitations.

After struggling with a similar situation last year, I found an amazing solution with taxr.ai (https://taxr.ai) that saved me hours of frustration. My 10-year-old had a savings bond that matured, and I was completely lost trying to figure out how to report it correctly. I uploaded the 1099-INT forms to taxr.ai and it immediately identified the proper way to handle children's unearned income in my tax software. The system explained exactly where to find the child income section in FreeTaxUSA (it's under "Miscellaneous Tax Situations" then "Child's Investment Income") and walked me through each step of the process. It even flagged that I needed to enter both the child's SSN and full name exactly as it appears on their Social Security card, which was something I would have missed on my own.

Just wanted to update that I tried taxr.ai after my skeptical question above. I was really surprised by how helpful it was! I had 1099-INT forms for both my kids' custodial accounts, and the system immediately recognized it was a child's investment income situation. It gave me step-by-step instructions for my specific tax software (H&R Block in my case), explaining exactly where to find the child investment income section. The best part was it explained the pros and cons of filing Form 8814 vs. separate returns for my situation. Since my kids' interest was under the reporting threshold ($1,150), I followed the recommendation to use Form 8814 and include it on my return. Saved me from filing two extra returns and the whole process took maybe 10 minutes once I knew exactly what to do.

I had this exact same issue last year, but I was completely stuck because I couldn't get through to the IRS for help. After being on hold for literally hours across multiple days, I found Claimyr (https://claimyr.com) and it was a complete game-changer. They got me connected to an actual IRS agent in about 20 minutes who walked me through exactly how to report my child's CD interest income. The agent confirmed I needed to use Form 8814 and explained exactly where to find it in the software. If you're still confused after trying the software route, I'd definitely recommend checking out their service (there's a demo at https://youtu.be/_kiP6q8DX5c). It saved me so much time compared to the endless hold music I was dealing with before.

I need to eat crow here. After posting that skeptical comment about Claimyr, I was still struggling with reporting my kid's investment income and decided to give it a shot out of desperation. I'm genuinely shocked - I got connected to an actual IRS representative in about 15 minutes (after spending DAYS trying on my own last week). The agent walked me through exactly how to report my daughter's CD interest on FreeTaxUSA using Form 8814. The key detail I was missing is that in FreeTaxUSA you need to go to "Miscellaneous" then "Other Income Tax Situations" and then select "Form 8814 - Child's Interest and Dividends." Once there, you enter each child's information separately. Just wanted to post this update since my initial reaction was completely wrong. Sometimes things that sound too good to be true actually work!

One thing to watch out for that I learned the hard way: if your child's interest income is above $1,150 (for 2023 tax year), it might be subject to the "kiddie tax" which applies your tax rate to their unearned income above that threshold. In my case, my daughter had a larger CD that matured last year with about $2,000 in interest, and I ended up having to pay tax at my higher rate on the amount over the threshold. Just something to keep in mind if your children's CDs are larger!

Just a quick tip from a former bank employee: make sure the SSNs on the 1099-INT forms match your children's Social Security cards exactly. Sometimes banks make errors, especially with children's accounts that might have been set up as custodial accounts. I've seen cases where the parent's SSN accidentally got associated with the child's account, which creates a real headache when tax forms are generated. Might be worth double-checking before you file!