What Are the Tax Rules for Children?

Determining your tax liability depends on several factors. When it comes to tax rules for children, you’ll have a few considerations that differ from filing taxes for an adult. 

First, take a look at the type of income your children received and whether it will require your dependent child to file a tax return: 

• Earned income – This is the income your child receives from wages or salaries. If this amount is above the standard deduction amount of $12,000, a separate tax return should be filed for your child. 
• Unearned income – This is the income, such as interest, dividends, or capital gains received from investments. If your child has had more than $1,050 in gross income, a separate tax return should be filed for your child. 

Additionally, a separate return should be filed if the child had both earned and unearned income and the total exceeds either $1,050 or the child’s earned income (up to $11,650) plus $350. 

If your child doesn’t meet the tax filing requirement threshold for earned income, you might still want to file a return. It’s possible they might receive a refund if too much money was withheld or if certain tax benefits apply. 

Taxes for Kids: What If Taxes Weren’t Withheld From Child’s Unearned Income?

If taxes aren’t withheld from your child’s unearned income, they might incur an underpayment penalty. If your child’s account will continue to receive unearned income in 2024, they might need to increase their federal income tax withholding or their estimated tax payments to avoid the penalty.