Any 16-year-old boy or girl who has a job these days qualifies as amazing. But don't be surprised if your amazing 16-year-old child has to file a tax return and even pay taxes. The only time age might excuse you from filing a tax return is when you’re 65 or older and your income is below certain very low thresholds. Children can be six months, six years or 16 and still have to pay taxes. It depends on whether their earned, unearned or combination income exceeds certain limits. The applicable standard deduction is also a factor. Earned income is what they make from a job. Unearned income, sometimes referred to as passive income, would be interest or dividends from investments.
Filing Taxes for Teens
Even if the amount of income from your amazing 16-year-old child’s job doesn’t require a tax return, if a refund is coming, a return should be filed. Tax calculators are easy to find online. They can quickly tell you how much of a refund may be due. Just plug in earnings, the amount of taxes that were withheld for the year and the filing status, likely single.
If your child has unearned income only, it may be combined with yours by attaching Form 8814 to your tax return. If you do this, your child does not have to file a return. However, several requirements must be met. For starters, your child has to be younger than 19, or younger than 24 if a full-time student. Check the IRS’s website for a complete list of requirements. But be aware that including your child’s income on your tax return could put you in a higher tax bracket. It’s a good idea to check with your tax professional to see if it makes sense for you to do this.
Apply the 2018 Improved Maximums
Beginning with the 2018 tax year, a dependent child’s earned minimum income to file taxes is much higher than it used to be. A child who has only earned income can make up to $12,000 tax-free. The standard deduction will be the amount that was earned plus $350, up to a maximum of $12,000. A return only needs to be filed if this total is over $12,000. This is significantly more than what was allowed tax-free in 2017. On the other hand, the threshold for filing a tax return on unearned income remains pretty low. If your child has only unearned income and it totals more than $1,050, a return must be filed in 2018.
If your child has a combination of earned and unearned income, a 2018 return must be filed if one of these three criteria are met: the earned portion is more than $12,000, the unearned portion is more than $1,050, the combination equals more than $1,050 or more than the earned portion plus $350 (up to $12,000), whichever is larger.
Filing 2017 Taxes
If you requested an extension on your 2017 taxes, they must be filed by Oct. 15, 2018. For the 2017 tax year, your child can have earned up to $6,350 before a tax return has to be filed. For unearned income, the maximum is $1,050 before a return has to be filed.
If your child had both earned and unearned income in 2017, a tax return must be filed if the earned portion was more than $6,300, the unearned portion was more than $1,050 or the combined income was the larger of $1,050 or the earned portion (up to $5,950) plus $350.
Also for 2017, if a child’s unearned income is over $2,100, it’s taxed at the parents' rate if the parents' rate is higher. This rule was meant to discourage parents from transferring interest or dividends-earning assets to their children so they would be taxed at a lower rate. But starting in 2018, tax on unearned income will be based on trust and estate tax laws. This could mean a smaller or larger tax bill depending on how much unearned income a child has.
In 2017, parents can claim their child’s unearned income on their 2017 tax return as long as it was less than $10,500 and the child didn’t pay any taxes on it during the year.
Helping Your Child File
The IRS expects children to prepare their own tax returns unless they’re too young to do so. If this is the case with yours, you are responsible for getting it done. You can do it yourself or hire a tax preparer. If your child is too young to sign the tax return, you can sign it. Sign the child’s name and write next to or below it, “by (your signature), parent (or guardian) for minor child." Even if your child is old enough to file a tax return, the first time doing taxes can be a bit daunting. Guiding them through it can be great way to provide a valuable life skill that will be used again and again.
Just because your son or daughter files their own tax return doesn’t mean you have to stop claiming them as dependents on yours. You can still claim your child as a dependent if the IRS’s definition of “qualifying child” is met. The child has to be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any of these. The child must also be under 19 or under 24 if a full-time student and must have lived with you for more than half of the year. Additionally, children claimed as dependents cannot have paid for more than 50 percent of their own expenses during the tax year. See IRS’s Publication 501 or check with your professional tax preparer for additional information.
- Intuit Turbo Tax: Rules for Claiming a Dependent on Your Tax Return
- Intuit Turbo Tax: Should I Include a Dependent's Income on My Tax Return?
- IRS.gov: Publication 501, Exemptions, Standard Deduction and Filing Information
- IRS.gov: Publication 929 (2017), Tax Rules for Children and Dependents
- NOLO: When Does Your Child Have to File a Tax Return?