Question About The Kiddie Tax (Form 8615)

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Leesbro63
Posts: 5532
Joined: Mon Nov 08, 2010 4:36 pm

Question About The Kiddie Tax (Form 8615)

Post by Leesbro63 » Sun Feb 18, 2018 7:57 am

I looked at Form 8615 and can't quite figure this out. If the parent has dividend and capital gains income, how does 8615 figure that into the "Kiddie Tax"? It appears to just lump the child's unearned income onto the parent's taxable income, with no regard to the nature of the parent's income. I admit that I only looked at this a little and suspect I'm missing something. It would appear that the only "input" for 8615 is the parent's taxable income...there is no input for the breakdown of the types of income (regular income vs div/cap gains). What am I missing? In other words, it appears that 8615 assumes that ALL of the parent's income is earned or ordinary income, with no allowance for the fact that some or all could be div/cap gain income, perhaps taxed at a much lower rate.

Wagnerjb
Posts: 7203
Joined: Mon Feb 19, 2007 8:44 pm
Location: Houston, Texas

Re: Question About The Kiddie Tax (Form 8615)

Post by Wagnerjb » Sun Feb 18, 2018 9:06 am

Leesbro63 wrote:
Sun Feb 18, 2018 7:57 am
I looked at Form 8615 and can't quite figure this out. If the parent has dividend and capital gains income, how does 8615 figure that into the "Kiddie Tax"? It appears to just lump the child's unearned income onto the parent's taxable income, with no regard to the nature of the parent's income. I admit that I only looked at this a little and suspect I'm missing something. It would appear that the only "input" for 8615 is the parent's taxable income...there is no input for the breakdown of the types of income (regular income vs div/cap gains). What am I missing? In other words, it appears that 8615 assumes that ALL of the parent's income is earned or ordinary income, with no allowance for the fact that some or all could be div/cap gain income, perhaps taxed at a much lower rate.
In that situation, when you calculate the tax on the combined income (parents plus child), you use the Qualified Dividends and Capital Gains worksheet. It states that on line 9 of the form 8615, and the instructions also state this.

From the instructions:
If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040, 1040A, or 1040NR instructions to figure the tax, unless you have to use the Schedule D Tax Worksheet or Schedule J (see below).
Best wishes.
Andy

Leesbro63
Posts: 5532
Joined: Mon Nov 08, 2010 4:36 pm

Re: Question About The Kiddie Tax (Form 8615)

Post by Leesbro63 » Sun Feb 18, 2018 11:31 am

Wagnerjb wrote:
Sun Feb 18, 2018 9:06 am
Leesbro63 wrote:
Sun Feb 18, 2018 7:57 am
I looked at Form 8615 and can't quite figure this out. If the parent has dividend and capital gains income, how does 8615 figure that into the "Kiddie Tax"? It appears to just lump the child's unearned income onto the parent's taxable income, with no regard to the nature of the parent's income. I admit that I only looked at this a little and suspect I'm missing something. It would appear that the only "input" for 8615 is the parent's taxable income...there is no input for the breakdown of the types of income (regular income vs div/cap gains). What am I missing? In other words, it appears that 8615 assumes that ALL of the parent's income is earned or ordinary income, with no allowance for the fact that some or all could be div/cap gain income, perhaps taxed at a much lower rate.
In that situation, when you calculate the tax on the combined income (parents plus child), you use the Qualified Dividends and Capital Gains worksheet. It states that on line 9 of the form 8615, and the instructions also state this.

From the instructions:
If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040, 1040A, or 1040NR instructions to figure the tax, unless you have to use the Schedule D Tax Worksheet or Schedule J (see below).
Best wishes.
Your reply was helpful. Upon further tinkering with Turbotax, I see that there is an input for parental QD&CG. And that does lower the kiddie tax a slight bit. Thank you.

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