Teenagers who have income need to file taxes just like adults, but the rules are a little different.
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This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.
When does a teenager have to file a tax return?
A teenager must file a tax return if they meet any of the following situations.
Income Over the Standard Deduction
All people, including teenagers, have to file a federal income tax return if their income is above the standard deduction. That includes both earned and unearned income.
Earned income is income from a job. It might be a summer job or a part-time job after school.
Unearned income is things like interest from a savings account or dividends and capital gains from stocks.
Here are the current standard deduction amounts.
|Single and Married Filing Separately||$12,950||$12,550||$12,400|
|Married Filing Jointly and Qualifying Widower*||$25,900||$25,100||$24,800|
|Head of Household||$19,400||$18,800||$18,650|
|Single Age 65+||$14,700||$14,250|
|Married Filing Separately One Spouse 65+||$14,350||$13,900|
|Married Filing Separately Both Spouses 65+||$15,750||$15,250|
|Married Filing Jointly and Qualifying Widower Age 65+||$27,300||$26,450|
|Married Filing Jointly Both Spouses 65+||$28,700||$27,800|
|Head of Household Age 65+||$20,800||$20,500|
|Dependent with Unearned Income Only||$1,150||$1,100|
|Dependent with Earned and Unearned Income Totalling Less Than the Usual Standard Deduction Amount||Earned income plus $400||Earned income plus $350|
The next two items are continuations of this rule. Dependents do get a standard deduction, but it’s lower than what non-dependents get. It depends on their earned and unearned income.
After that, there’s one more event lower minimum income requirement that applies to anyone who is self-employed.
Unearned Income Over $1,150
If a teenager has unearned income over $1,150, either they have to file a tax return, or you can report the income on your own tax return.
Unearned income is mainly from savings accounts and investments. This includes accounts opened by someone else in the teenager’s name.
The benefit to reporting unearned income on a teenager’s tax return is that they might be in a lower tax bracket (but see the Kiddie Tax below). The benefit to reporting the income on a parent’s tax return is that it’s easier not to have to do a separate tax return for them — especially when a child is younger.
To report unearned income on a parent’s tax return, both the child and parent have to qualify.
The child qualifies if they meet all of the following.
- Are under 19 at the end of the year or under 24 if a full-time student
- Have no income except interest, dividends, capital gains, and Alaska Permanent Fund payments
- Have gross income under $11,000
- Have to file a tax return
- Do not file a joint tax return (if married)
- Made no estimated tax payments, including tax refunds carried over from the previous year
- Had no federal income tax withheld
The parent qualifies if they meet one of the following.
- File a joint return with the child’s other parent
- Are married to the child’s other parent, file separately, and have the higher taxable income
- Are unmarried (including separated or divorced) and the child lived with you for most of the year
See IRS Form 8814 for more info.
Unearned Income Over $400 and Total Income Above $1,550
There is an additional minimum threshold for the filing requirement for unearned income if a teenager has earned income. If their total income is at least $1,550 and at least $400 is unearned income, they must file a tax return. This is due to how the standard deduction for dependents works.
In other words, if they receive $500 in savings account interest and don’t have a job, they don’t need to file because they’re under the $1,150 minimum discussed above. If they do have a job, they have to file because $500 is more than $400.
Yes, this does mean that teenagers get penalized for having savings if they’re working.
Self-Employment Income of $400 or More
If a teenager has a job as an independent contractor, they have to file a tax return if they make $400 or more. For example, a common job for teenagers is as a youth sports referee which is usually classified as an independent contractor.
The reason for having to file a tax return with only $400 of income is that independent contractors have to pay self-employment tax. This includes Social Security and Medicare taxes.
Even if a teenager doesn’t make enough to owe income taxes, they’ll have to pay self-employment taxes on all of their self-employment income.
A teenager may also want to file a tax return if they’re owed a tax refund. For example, if they didn’t set up their W-4 correctly or made less than they expected, their employer may have withheld income taxes.
The only way to get a tax refund is to file a tax return. If you don’t file a tax return to claim a refund, the IRS will keep the extra taxes.
What is the Kiddie Tax?
The Kiddie Tax is a special tax rule that applies when a child has more than a certain amount of unearned income. If the child has unearned income above the limits and meets other criteria, their parent’s highest tax rate applies to their unearned income over $2,200.
The original purpose of this rule was to stop wealthy people from hiding investment income under their children’s name, but it applies to anyone who meet the criteria regardless of the parent’s income level.
Kiddie Tax Minimum Unearned Income
|Tax Year||Unearned Income|
Additional Requirements for the Kiddie Tax to Apply
- One of the following age requirements
- Under 18 at the end of the tax year (age as of 12/31)
- Age 18 and didn’t have earned income that provided for more than half their support
- Full-time student at least 19 and under 24 that didn’t have earned income that provided for more than half their support
- At least one parent was alive at the end of the year
- The child is required to file a tax return
- The child does not file a joint tax return
See IRS Topic 553 for more on the Kiddie Tax.
Does a teenager or student filing a tax return mean they’re not your dependent?
As a parent, you need to be aware of your child’s income and whether they still qualify to be your dependent. Them filing a tax return doesn’t mean they’re not your dependent, but it can cause you problems if you don’t plan ahead.
The general rule for a dependent is that the parent provides at least half of their support. So if a teenager or college student makes too much, you may not be able to claim them as a dependent anymore. It’s a good idea to talk to a tax accountant together to see how their income may affect you.