Reader feedback: "The standard deduction is e...
"The standard deduction is earned income +$350, ..." is not correct because IRS says
The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of:
- $1,050, or
- The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,300).
Example: Child earns $600. The wiki implies standard deduction is $600 + $350 = $950, but IRS says $1050 is the standard deduction.
This is a direct quote from IRS Publication 929, Tax Rules for Children and Dependents (Standard deduction).
Can an expert please review this proposed change? I don't know if this is correct.
Fixed. Grabiner 21:49, 17 December 2017 (EST)
Taxation of children with Earned Income
If the children have earned income then:
- The standard deduction is the greater of ($1,050) or (earned income + $350), but no more than the normal standard deduction of $6,300 for a single person
- This has the effect of the first $1,050 of unearned income is untaxed
- The next $1,050 is taxed at the child's rate
- Can still realize $2,100 of untaxed unearned income, but only $350 of that can be interest and non-QDI (vs $1050 for no job case)
- Note that by gifting appreciated securities to a child, one can save at least $315 per year per child in capital gains tax (if in the 15% LTCG bracket) and up to $832 per year per child (if in the 39.6% bracket with tax loss carryforwards)
- "Publication 929, Tax Rules for Children and Dependents". Internal Revenue Service. 11-Sep-2017. https://www.irs.gov/publications/p929.
LadyGeek 16:49, 15 December 2017 (EST)