Could Your Child Be Liable for Taxes? Here’s What You Need to Know

Posted by Keri Thomson Last updated on October 30, 2025

Could Your Child Be Liable for Taxes? Here’s What You Need to Know It’s easy to assume that children don’t need to worry about taxes. However, if your child earns unearned income, like dividends or interest from investments, the IRS may require them to file a tax return. There are two primary scenarios that could make this necessary.

1. Their unearned income exceeds $2,600

When a child’s unearned income surpasses $2,600, they are subject to the “kiddie tax,” which means they must file Form 8615, Tax for Certain Children Who Have Unearned Income. This applies if your child meets any of the following criteria:

Under the age of 18 at the end of the year
Age 18 and did not provide more than half of their own financial support
A full-time student between the ages of 19 and 23 who did not contribute more than half of their own support

Additionally, your child might be subject to the Net Investment Income Tax (NIIT), which is a 3.8% tax on whichever is lower:

Their net investment income
The portion of their modified adjusted gross income that exceeds a certain threshold

If the NIIT applies, you might need to adjust their income tax withholding or estimated payments to cover the additional tax liability.

What qualifies as net investment income?

The IRS includes the following in net investment income:

Interest, dividends, annuities, royalties, and rental income (unless the rental income is from an exempt business)
Passive business earnings or income from trading stocks, bonds, or commodities
Net capital gains (including profits from investments like stocks, mutual funds, or real estate)
Gains from selling shares in partnerships or S corporations (with some exceptions)

2. Their unearned income is under $13,000

If your child’s unearned income falls between $2,600 and $13,000, you may have an alternative option for filing.

When unearned income is below $13,000, you could report it on your own tax return, rather than filing a separate return for your child. To do this, you must attach Form 8814, Parent’s Election to Report Child’s Interest and Dividends, to your own Form 1040.

This option is available under the following conditions:

Your child is under age 19 (or under age 24 if a full-time student) at the end of the year
Their unearned income is less than $13,000 and only includes interest, dividends, capital gains distributions, or Alaska Permanent Fund dividends
No estimated tax payments were made under your child’s Social Security number
There were no overpayments from the previous year applied to this year under their name
No backup withholding was applied to their income
Your child is not filing a joint return with their spouse
You (or you and your spouse) are the eligible parent(s) to make this election