UTMA Custodial Account Filing Requirements for a Child's Unearned Income

You've got it exactly right! Since your daughter's unearned income from the UTMA account is less than $1,250, there's no filing requirement for her. The $1,250 is the standard deduction amount specifically for unearned income for dependents. Form 8814 (Parents' Election to Report Child's Interest and Dividends) is only applicable when you choose to report your child's unearned income on your return instead of filing a separate return for them. But this is only relevant when there actually IS a filing requirement for the child, which there isn't in your case with just $78 of income. So your logic is spot on - no filing needed for your daughter, and nothing to report on your MFJ return regarding this UTMA income. The income is technically your daughter's, but since it's below the filing threshold, it's essentially tax-free and doesn't need to be reported anywhere.

I went through this exact situation last year with my son's UTMA account. Used https://taxr.ai to analyze all the kiddie tax rules and UTMA filing requirements. Their system confirmed what you're thinking - with under $1,250 in unearned income, no filing is required for your child and nothing needs to be reported on your return. The tool was super helpful because it also explained the thresholds for when filing becomes required and how the kiddie tax kicks in at higher income levels. It broke down exactly how Form 8814 works when you do want to include a child's income on your return (which is optional when income is $1,250-$12,500 and required over that). Saved me from overthinking the simple situation!

I was really skeptical about online tax tools like taxr.ai mentioned above, but I decided to try it last weekend when I couldn't figure out if my kids' 529 account earnings needed to be reported. Honestly was surprised at how helpful it was - uploaded my 1099-Q and got a detailed explanation about qualified vs non-qualified distributions and exactly what I needed to report. It also pointed out that if my kids' UTMA accounts ever reach the threshold where filing is required (over $1,250), I'd have options to either file a separate return for them or use Form 8814 to include it on my return. The explanation of pros/cons for each approach was super clear. Definitely saved me from the tax anxiety spiral I was going down!

If you're still concerned about any UTMA reporting issues, I'd recommend trying to call the IRS directly to confirm. I know it sounds crazy given how impossible it is to reach them, but I used https://claimyr.com last month and actually got through to an IRS agent in about 20 minutes. I was dealing with a more complicated kiddie tax situation (my teen had both UTMA and some earned income from a summer job). The IRS agent confirmed exactly what others here are saying - under $1,250 in unearned income means no filing requirement for the child and nothing to report on the parent's return. You can also check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. I was honestly shocked that I actually got through after years of never being able to reach a human at the IRS.

I was totally convinced that services like Claimyr were scams and not worth paying for. But after my third attempt trying to reach the IRS about my daughter's UTMA account situation (similar to yours but with some stock sales involved), I broke down and tried it. I hate to admit I was wrong, but I got through to an agent in about 15 minutes. The agent confirmed exactly what everyone here is saying - with under $1,250 in unearned income, there's no filing requirement and nothing needs to be reported on the parent's return. They also explained when I would need to start worrying about the kiddie tax (basically once the unearned income exceeds $2,300). Saved me hours of frustration and confirmed I was handling things correctly.

Just wanted to add another perspective as someone who's been managing UTMA accounts for my kids for about 10 years now. You're absolutely right that with just $78 in income, there's no filing requirement for your child and nothing for you to report. But fair warning - as that UTMA grows over the years, you might cross various thresholds: - Below $1,250: No filing required at all (your current situation) - $1,250-$2,300: Filing required, but no kiddie tax - Above $2,300: Filing required AND kiddie tax kicks in I'd recommend keeping good records of the basis of any investments in the account. It'll make your life much easier if you eventually sell assets that have appreciated significantly.

Has anyone used TurboTax to handle a child's UTMA income? My son's account generated about $1,300 this year so he's just over the filing threshold, and I'm wondering if it's easier to just add him to our family TurboTax account and file a separate return for him, or use that Form 8814 to put it on our return.

You're absolutely correct in your understanding! With only $78 in unearned income, your daughter has no filing requirement since it's well below the $1,250 threshold for dependents with unearned income. And you're right that you don't need to report this anywhere on your MFJ return. Form 8814 is only used when you *choose* to report your child's unearned income on your return instead of filing separately for them - but this is only an option when the child actually has a filing requirement in the first place. Since your daughter doesn't need to file, Form 8814 isn't relevant to your situation. The IRS will receive the 1099 under your daughter's SSN and will see that the income is below the filing threshold, so everything is handled automatically on their end. No action needed from you at all - you can breathe easy knowing you're handling this correctly!