What US-resident or US citizen parents need to know about child tax filing

We explore if a child has any tax filing obligations in the US, with a focus on unmarried, dependent children with one or more US parent(s).

In brief

• If your child is a US person, they may have a tax filing requirement.
• The type and amount of income your child has, determines whether they file their own return, or their income is reported on their parent(s) return.
• It’s important to consider foreign informational reporting, such as bank accounts, to avoid penalties.

We are often asked by persons in the UK whether their child has a US tax filing obligation stemming from either the parent(s) US citizenship or the US citizenship of the child.

Determining whether a US filing requirement exists for a child is therefore very important.

If you are a US person and your child has an investment account or perhaps a summer job, you definitely need to be thinking about whether they also have their own US tax filing obligation.

If your child has a filing requirement but has any earned income (or unearned income in excess of the limits set out in this article) then they will have to file their own personal tax return.

If your child is a US person (US citizen, green card holder, or resident), whether they have a US tax return filing obligation will depend on their gross income, filing status, age and whether they can be claimed as a dependent for US tax purposes. For example, if your child is a US citizen by birth but you (their parents) are not US persons then they will only have a tax return filing requirement if their total taxable income is above $12,950, or if they owe any ‘special taxes’, such as alternative minimum tax, self-employment tax, Passive Foreign Investment Company tax, etc.

However, this article focusses on unmarried children who have a US parent and who would be regarded as dependents under US tax rules (generally, this includes US-resident children of US-resident parent(s) who are under 19 or under 24 and in full-time education).

A US tax filing requirement will exist for US-dependent children if any of the following apply:

• Unearned income (taxable interest, ordinary dividends, capital gain distributions, unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust) was more than $1,150.

• Proceeds from capital disposals are reported on Form 1099 (even if there is a loss).

• Earned income (salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants) was more than $12,950.

• Self-employment income in excess of $400.

• Gross income (combined unearned and earned income) was more than the larger of: 

  • $1,150, or

  • Their earned income (up to $12,550) plus $400.

• Special reporting is due, such as that relating to Foreign Controlled Corporations or Passive Foreign Investment Companies.

The filing requirement exists even if no tax is ultimately due.

If your dependent child has a filing requirement but does not have earned income (and no capital disposals), and only has interest, capital gains distributions and dividend income, then you may elect to include the child’s income on your tax return instead of the child having to file their own tax return. Form 8814 (Parents’ Election to Report Child’s Interest and Dividends) is used to report the child’s interest and dividends on your tax return. However, you can only use this form if:

• The child was under age 19 (or under age 24 if a full-time student) at the end of the year.

• The child had gross income only from interest, dividends and capital gain distributions.

• Their total income was less than $11,500.

• No estimated tax payments or Federal income tax withholding were applied under your child's name and social security number.

The concept has been around for many years and Form 8615 (Tax for Certain Children Who Have Unearned Income) is the form used to compute the ‘Kiddie tax’. ‘Kiddie tax’ is the tax imposed on a child’s unearned income at their US parent(s) marginal tax rates - also considering (and aggregating with) income from all other dependent children. 

Further to the tax return filing requirement, it is also imperative that any foreign informational reporting is considered should your child meet the relevant thresholds. For example, if your child has interests in foreign financial accounts where the aggregate value of those accounts exceeds $10,000 during the tax year, they will have a FinCEN 114 (Report of Foreign Bank and Financial Accounts) filing requirement. Failure to file this form each year could result in significant penalties. 

Additionally, where a child needs to file their own tax return, and this cannot be filed by 15 April (or 15 June if residing outside the US), a separate extension request must also be submitted in the name of the child. Therefore, it is important to review the potential application of these filing rules prior to the normal filing deadline even if automatically filing an extension for your own tax return.  

The figures quoted above are those which apply for 2022 US tax returns. Figures for future years were not final at the time of publication but will be adjusted for inflation annually.

Figures updated as of 23rd August, 2023.