Filing for Dependents
To prevent taxpayers from gaining an advantage from shifting
income from the wealthier taxpayer to a dependent in a lower tax bracket,
Congress has created convoluted income tests to determine which dependents
are required to file a tax return on their own behalf. For example,
the filing threshold for individuals who can be claimed on someone's
return depends on three factors: the type of income (earned versus
unearned); the dependent's marital status (single or married) and
the dependent's age and sightedness (age 65-or-older or not; blind
or not.)
Filing Threshold for Dependents
An
unmarried dependent under age 65 and not blind must file for 2014
if any of the following are true:
- Unearned income was over $1,000
- Earned income was over $6,200
- Gross income was more than the larger of:
- $1,000 or
- $350 plus amount of earned income up to $5,850
An unmarried dependent who is either age 65 or older, or,
blind must file for 2014 if any of the following are true:
- Unearned income was over $2,550 ($4,100 if over age 65 and blind)
- Earned income was over $7,750 ($9,300 if over age 65 and blind)
- Gross income was more than the larger of:
- $2,550 ($4,100 if over age 65 and blind)
- $1,900 ($3,450 if over age 65 and blind) plus amount of
earned income up to $5,850
A married dependent under age 65 and not blind must file
for 2014 if any of the following are true:
- Unearned income was over $1,000
- Earned income was over $6,200
- Gross income was at least $5 and the spouse files a separate return
and itemizes deductions
- Gross income was more than the larger of:
- $1,000 or
- $350 plus amount of earned income up to $5,850
A married dependent who is either age 65 or older, or, blind
must file for 2014 if any of the following are true:
- Unearned income was over $2,200 ($3,400 if over age 65 and blind)
- Earned income was over $7,400 ($8,600 if over age 65 and blind)
- Gross income was at least $5 and the spouse files a separate return
and itemizes deductions
- Gross income was more than the larger of:
- $2,200 ($3,400 if over age 65 and blind)
- $1,550 ($2,750 if over age 65 and blind) plus amount of
earned income up to $5,850
When tallying up a dependent's income, "unearned income"
includes taxable interest, dividends, capital gains, unemployment
compensation, taxable Social Security benefits, pensions, annuities,
and trust distributions. "Earned income" includes wages, salaries,
tips, and net income from a business; it also includes taxable scholarship
and fellowship grants.
If the child or other dependent is
too young or otherwise incapable of filing a tax return, his or her
parent, guardian, or other legally responsible person must file the
tax return for the dependent. In that case the responsible adult
filing the return would sign the return for the dependent, and add
their own name; for example, "John Jones, Jr., by John Jones, parent
of minor child."
If the child is under age 19, or a full-time
student under age 24, and his or her income is less than $10,000 for
2014 and is solely from interest and dividends, the parent
has the option to include the child's income on the parent's return
by filing IRS Form 8814, Parent's Election to Report Child's Interest
and Dividends, along with the parent's return. If this election
is made, the child does not need to file a return.
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Save Money Combining a child's income with that
of the parents would save the child from having to file his or her
own tax return; however, it frequently results in a slightly larger
tax bill since the child's income will increase the parents' AGI and
possibly reduce the deductible portion of the parents' itemized medical
expenses, miscellaneous deductions, casualty losses, and IRA deductions. There
are many other tax breaks that are phased out at higher levels of
AGI and that can potentially be lost or reduced if a child's income
is combined with the parents' income, so in most cases the family
will be better off if the child files a separate return. |
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