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Freetax Publication 929 - Main Content Table of Contents Part 1. Freetax Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. Freetax Designated as representative. Freetax IRS notice. Freetax Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Freetax Part 2. Freetax Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. Freetax Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Freetax Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Freetax Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Freetax Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. Freetax Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. Freetax A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. Freetax See Other Filing Requirements, later. Freetax The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Freetax  To find out whether a dependent must file, read the section that applies, or use Table 1. Freetax Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. Freetax Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Freetax Example. Freetax William is 16. Freetax His mother claims an exemption for him on her income tax return. Freetax He worked part time on weekends during the school year and full time during the summer. Freetax He earned $7,000 in wages. Freetax He did not have any unearned income. Freetax He must file a tax return because he has earned income only and his gross income is more than $6,100. Freetax If he is blind, he does not have to file a return because his gross income is not more than $7,600. Freetax Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. Freetax Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Freetax Example. Freetax Sarah is 18 and single. Freetax Her parents can claim an exemption for her on their income tax return. Freetax She received $1,970 of taxable interest and dividend income. Freetax She did not work during the year. Freetax She must file a tax return because she has unearned income only and her gross income is more than $1,000. Freetax If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. Freetax Election to report child's unearned income on parent's return. Freetax   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. Freetax See Parent's Election To Report Child's Interest and Dividends in Part 2. Freetax If the parent makes this election, the child does not have to file a return. Freetax Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. Freetax Filing Requirement Worksheet for Most Dependents 1. Freetax Enter dependent's earned income plus $350     2. Freetax Minimum amount   $1,000 3. Freetax Compare lines 1 and 2. Freetax Enter the larger amount     4. Freetax Maximum amount   6,100 5. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount     6. Freetax Enter the dependent's gross income. Freetax If line 6 is more than line 5, the dependent must file an income tax return. Freetax If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Freetax       Table 1. Freetax 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. Freetax   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Freetax   Single dependents—Were you either age 65 or older or blind?     No. Freetax You must file a return if any of the following apply. Freetax       Your unearned income was over $1,000. Freetax Your earned income was over $6,100. Freetax Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Freetax         Yes. Freetax You must file a return if any of the following apply. Freetax     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). Freetax       Married dependents—Were you either age 65 or older or blind?     No. Freetax You must file a return if any of the following apply. Freetax       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Freetax Your unearned income was over $1,000. Freetax Your earned income was over $6,100. Freetax Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Freetax       Yes. Freetax You must file a return if any of the following apply. Freetax       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Freetax Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). Freetax       Example 1. Freetax Joe is 20, single, not blind, and a full-time college student. Freetax He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. Freetax He received $200 taxable interest income and earned $2,750 from a part-time job. Freetax He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). Freetax Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Freetax Enter dependent's earned income plus $350   $ 3,100 2. Freetax Minimum amount   1,000 3. Freetax Compare lines 1 and 2. Freetax Enter the larger amount   3,100 4. Freetax Maximum amount   6,100 5. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount   3,100 6. Freetax Enter the dependent's gross income. Freetax If line 6 is more than line 5, the dependent must file an income tax return. Freetax If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Freetax   $ 2,950   Example 2. Freetax The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Freetax He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). Freetax Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Freetax Enter dependent's earned income plus $350   $ 3,100 2. Freetax Minimum amount   1,000 3. Freetax Compare lines 1 and 2. Freetax Enter the larger amount   3,100 4. Freetax Maximum amount   6,100 5. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount   3,100 6. Freetax Enter the dependent's gross income. Freetax If line 6 is more than line 5, the dependent must file an income tax return. Freetax If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Freetax   $ 3,350   Age 65 or older or blind. Freetax A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. Freetax Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Freetax Enter dependent's earned income plus $350     2. Freetax Minimum amount   $1,000 3. Freetax Compare lines 1 and 2. Freetax Enter the larger amount     4. Freetax Maximum amount   6,100 5. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount     6. Freetax Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Freetax Add lines 5 and 6. Freetax Enter the total     8. Freetax Enter the dependent's gross income. Freetax If line 8 is more than line 7, the dependent must file an income tax return. Freetax If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. Freetax The facts are the same as in Example 2 except that Joe is also blind. Freetax He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). Freetax   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Freetax Enter dependent's earned income plus $350   $3,100 2. Freetax Minimum amount   1,000 3. Freetax Compare lines 1 and 2. Freetax Enter the larger amount   3,100 4. Freetax Maximum amount   6,100 5. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount   3,100 6. Freetax Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Freetax Add lines 5 and 6. Freetax Enter the total   4,600 8. Freetax Enter the dependent's gross income. Freetax If line 8 is more than line 7, the dependent must file an income tax return. Freetax If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. Freetax A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. Freetax But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Freetax A dependent must also file a tax return if he or she: Had wages of $108. Freetax 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. Freetax Spouse itemizes. Freetax   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). Freetax Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. Freetax Income tax was withheld from his or her income. Freetax He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Freetax See the tax return instructions to find out who qualifies for these credits. Freetax  By filing a return, the dependent can get a refund. Freetax Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. Freetax If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. Freetax Signing the child's return. Freetax   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. Freetax ” Authority of parent or guardian. Freetax   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. Freetax   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. Freetax That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. Freetax Third party designee. Freetax   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. Freetax The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. Freetax   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. Freetax This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. Freetax See the return instructions for more information. Freetax Designated as representative. Freetax   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. Freetax Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Freetax See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Freetax   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. Freetax IRS notice. Freetax   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. Freetax The notice will show who to contact. Freetax The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Freetax Child's earnings. Freetax   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. Freetax This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Freetax If the child does not pay the tax due on this income, the parent may be liable for the tax. Freetax Child's expenses. Freetax   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. Freetax Example. Freetax You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Freetax You made the payments out of your child's earnings. Freetax These items can be deducted only on the child's return. Freetax Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). Freetax However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Freetax Certain dependents cannot claim any standard deduction. Freetax See Standard Deduction of Zero , later. Freetax Worksheet 1. Freetax   Use Worksheet 1 to figure the dependent's standard deduction. Freetax Worksheet 1. Freetax Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. Freetax If you were 65 or older and/or blind, check the correct number of boxes below. Freetax Put the total number of boxes checked in box c and go to line 1. Freetax a. Freetax You 65 or older   Blind   b. Freetax Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Freetax Total boxes checked         1. Freetax Enter your earned income (defined below) plus $350. Freetax If none, enter -0-. Freetax 1. Freetax     2. Freetax Minimum amount. Freetax   2. Freetax $1,000   3. Freetax Compare lines 1 and 2. Freetax Enter the larger of the two amounts here. Freetax 3. Freetax     4. Freetax Enter on line 4 the amount shown below for your filing status. Freetax       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Freetax     5. Freetax Standard deduction. Freetax         a. Freetax Compare lines 3 and 4. Freetax Enter the smaller amount here. Freetax If under 65 and not blind, stop here. Freetax This is your standard deduction. Freetax Otherwise, go on to line 5b. Freetax 5a. Freetax     b. Freetax If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Freetax Enter the result here. Freetax 5b. Freetax     c. Freetax Add lines 5a and 5b. Freetax This is your standard deduction for 2013. Freetax 5c. Freetax     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Freetax It also includes any amount received as a scholarship that you must include in income. Freetax   Example 1. Freetax Michael is single, age 15, and not blind. Freetax His parents can claim him as a dependent on their tax return. Freetax He has taxable interest income of $800 and wages of $150. Freetax He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Freetax On line 3, he enters $1,000, the larger of $500 or $1,000. Freetax Michael enters $6,100 on line 4. Freetax On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Freetax His standard deduction is $1,000. Freetax Example 2. Freetax Judy, a full-time student, is single, age 22, and not blind. Freetax Her parents can claim her as a dependent on their tax return. Freetax She has dividend income of $275 and wages of $2,500. Freetax She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Freetax On line 3, she enters $2,850, the larger of $2,850 or $1,000. Freetax She enters $6,100 on line 4. Freetax On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Freetax Example 3. Freetax Amy, who is single, is claimed as a dependent on her parents' tax return. Freetax She is 18 years old and blind. Freetax She has taxable interest income of $1,000 and wages of $2,000. Freetax She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Freetax She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. Freetax Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Freetax She enters $1,500 (the number in box c times $1,500) on line 5b. Freetax Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Freetax Standard Deduction of Zero The standard deduction for the following dependents is zero. Freetax A married dependent filing a separate return whose spouse itemizes deductions. Freetax A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. Freetax A nonresident or dual-status alien dependent, unless the dependent is married to a U. Freetax S. Freetax citizen or resident alien at the end of the year and chooses to be treated as a U. Freetax S. Freetax resident for the year. Freetax See Publication 519, U. Freetax S. Freetax Tax Guide for Aliens, for information on making this choice. Freetax Example. Freetax Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Freetax However, her husband elects to file a separate return and itemize his deductions. Freetax Because he itemizes, Jennifer's standard deduction on her return is zero. Freetax She can, however, itemize any of her allowable deductions. Freetax Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. Freetax This is true even if the other taxpayer does not actually claim the exemption. Freetax Example. Freetax James and Barbara can claim their child, Ben, as a dependent on their return. Freetax Ben is a college student who works during the summer and must file a tax return. Freetax Ben cannot claim his own exemption on his return. Freetax This is true even if James and Barbara do not claim him as a dependent on their return. Freetax Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Freetax If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Freetax The exemption from withholding does not apply to social security and Medicare taxes. Freetax Conditions for exemption from withholding. Freetax   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Freetax For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. Freetax For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Freetax Dependents. Freetax   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Freetax The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Freetax The employee's unearned income will be more than $350. Freetax Exceptions. Freetax   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. Freetax The above exceptions do not apply to supplemental wages greater than $1,000,000. Freetax For more information, see Exemption From Withholding in chapter 1 of Publication 505. Freetax Example. Freetax Guy is 17 and a student. Freetax During the summer he works part time at a grocery store. Freetax He expects to earn about $1,200 this year. Freetax He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. Freetax The only other income he expects during the year is $375 interest on a savings account. Freetax He expects that his parents will be able to claim him as a dependent on their tax return. Freetax He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Freetax Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. Freetax Claiming exemption from withholding. Freetax    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Freetax The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Freetax Renewing an exemption from withholding. Freetax   An exemption from withholding is good for only one year. Freetax An employee must file a new Form W-4 by February 15 each year to continue the exemption. Freetax Part 2. Freetax Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Freetax If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Freetax (See Parent's Election To Report Child's Interest and Dividends , later. Freetax ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Freetax (See Tax for Certain Children Who Have Unearned Income , later. Freetax ) For these rules, the term “child” includes a legally adopted child and a stepchild. Freetax These rules apply whether or not the child is a dependent. Freetax These rules do not apply if neither of the child's parents were living at the end of the year. Freetax Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Freetax The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Freetax Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Freetax Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Freetax Parents are married. Freetax   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Freetax Parents not living together. Freetax   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Freetax If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Freetax   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. Freetax Parents are divorced. Freetax   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Freetax Custodial parent remarried. Freetax   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Freetax Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Freetax Do not use the return of the noncustodial parent. Freetax   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Freetax If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Freetax Parents never married. Freetax   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Freetax If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Freetax Widowed parent remarried. Freetax   If a widow or widower remarries, the new spouse is treated as the child's other parent. Freetax The rules explained earlier under Custodial parent remarried apply. Freetax Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Freetax If you do, your child will not have to file a return. Freetax You can make this election only if all the following conditions are met. Freetax Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Freetax Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Freetax The child's gross income was less than $10,000. Freetax The child is required to file a return unless you make this election. Freetax The child does not file a joint return for the year. Freetax No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Freetax No federal income tax was withheld from your child's income under the backup withholding rules. Freetax You are the parent whose return must be used when applying the special tax rules for children. Freetax (See Which Parent's Return To Use , earlier. Freetax ) These conditions are also shown in Figure 1. Freetax Certain January 1 birthdays. Freetax   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Freetax You cannot make this election for such a child unless the child was a full-time student. Freetax   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Freetax You cannot make this election for such a child. Freetax How to make the election. Freetax    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Freetax (If you make this election, you cannot file Form 1040A or Form 1040EZ. Freetax ) Attach a separate Form 8814 for each child for whom you make the election. Freetax You can make the election for one or more children and not for others. Freetax Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Freetax Rate may be higher. Freetax   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Freetax This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Freetax However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Freetax Deductions you cannot take. Freetax   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Freetax The additional standard deduction if the child is blind. Freetax The deduction for a penalty on an early withdrawal of your child's savings. Freetax Itemized deductions (such as your child's investment expenses or charitable contributions). Freetax Figure 1. Freetax Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Freetax Figure 1. Freetax Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Freetax   If you use Form 8814, your child's unearned income is considered your unearned income. Freetax To figure the limit on your deductible investment interest, add the child's unearned income to yours. Freetax However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. Freetax Alternative minimum tax. Freetax    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. Freetax If it is, you must include it with your own tax preference items when figuring your AMT. Freetax See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Freetax Reduced deductions or credits. Freetax   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Freetax Deduction for contributions to a traditional individual retirement arrangement (IRA). Freetax Deduction for student loan interest. Freetax Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Freetax Credit for child and dependent care expenses. Freetax Child tax credit. Freetax Education tax credits. Freetax Earned income credit. Freetax Penalty for underpayment of estimated tax. Freetax   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Freetax If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Freetax Get Publication 505 for more information. Freetax Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Freetax Only the amount over $2,000 is added to your income. Freetax The amount over $2,000 is shown on Form 8814, line 6. Freetax Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Freetax Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Freetax If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. Freetax On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Freetax Note. Freetax The tax on the first $2,000 is figured on Form 8814, Part II. Freetax See Figuring Additional Tax , later. Freetax Qualified dividends. Freetax   Enter on Form 8814, line 2a, any ordinary dividends your child received. Freetax This amount may include qualified dividends. Freetax Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. Freetax For detailed information about qualified dividends, see Publication 550. Freetax   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Freetax You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Freetax   Enter the child's qualified dividends on Form 8814, line 2b. Freetax But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Freetax Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Freetax (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Freetax ) Capital gain distributions. Freetax   Enter on Form 8814, line 3, any capital gain distributions your child received. Freetax The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. Freetax You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Freetax   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. Freetax (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Freetax ) Collectibles (28% rate) gain. Freetax    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. Freetax Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Freetax The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Freetax The denominator is the child's total capital gain distribution. Freetax Enter the result on line 4 of the 28% Rate Gain Worksheet. Freetax Unrecaptured section 1250 gain. Freetax   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. Freetax Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Freetax The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Freetax The denominator is the child's total capital gain distribution. Freetax Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Freetax Section 1202 gain. Freetax   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. Freetax (For information about the exclusion, see chapter 4 of Publication 550. Freetax ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Freetax The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Freetax The denominator is the child's total capital gain distribution. Freetax Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Freetax In some cases, the exclusion is more than 50%. Freetax See the instructions for Schedule D for details and information on how to report the exclusion amount. Freetax Example. Freetax Fred is 6 years old. Freetax In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. Freetax (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Freetax ) All of the ordinary dividends are qualified dividends. Freetax He has no other income and is not subject to backup withholding. Freetax No estimated tax payments were made under his name and social security number. Freetax Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Freetax They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. Freetax They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Freetax They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Freetax They enter the amount of Fred's capital gain distributions, $525, on line 3. Freetax Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Freetax They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. Freetax This is the total amount from Form 8814 to be reported on their return. Freetax Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Freetax They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Freetax They enter the result, . Freetax 75, on line 7. Freetax They divide the amount on line 3, $525, by the amount on line 4, $2,100. Freetax They enter the result, . Freetax 25, on line 8. Freetax They multiply the amount on line 6, $100, by the decimal on line 7, . Freetax 75, and enter the result, $75, on line 9. Freetax They multiply the amount on line 6, $100, by the decimal on line 8, . Freetax 25, and enter the result, $25, on line 10. Freetax They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. Freetax They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. Freetax They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Freetax Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Freetax Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Freetax This tax is added to the tax figured on your income. Freetax This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Freetax Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. Freetax Check box a on Form 1040, line 44, or Form 1040NR, line 42. Freetax Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Freetax If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Freetax Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Freetax When Form 8615 must be filed. Freetax   Form 8615 must be filed for a child if all of the following statements are true. Freetax The child's unearned income was more than $2,000. Freetax The child is required to file a return for 2013. Freetax The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Freetax At least one of the child's parents was alive at the end of 2013. Freetax The child does not file a joint return for 2013. Freetax These conditions are also shown in Figure 2. Freetax Certain January 1 birthdays. Freetax   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Freetax IF a child was born on. Freetax . Freetax . Freetax THEN, at the end of 2013, the child is considered to be. Freetax . Freetax . Freetax January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Freetax The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Freetax  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Freetax  ***Do not use Form 8615 for this child. Freetax Figure 2. Freetax Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Freetax Figure 2. Freetax Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Freetax (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Freetax ) On line C, check the box for the parent's filing status. Freetax See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Freetax Parent with different tax year. Freetax   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Freetax Example. Freetax Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Freetax Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Freetax Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. Freetax Parent's return information not known timely. Freetax   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Freetax   You can use any reasonable estimate. Freetax This includes using information from last year's return. Freetax If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Freetax   When you get the correct information, file an amended return on Form 1040X, Amended U. Freetax S. Freetax Individual Income Tax Return. Freetax Extension of time to file. Freetax   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Freetax S. Freetax Individual Income Tax Return. Freetax See the instructions for Form 4868 for details. Freetax    An extension of time to file is not an extension of time to pay. Freetax You must make an accurate estimate of the tax for 2013. Freetax If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. Freetax See Form 4868 and its instructions. Freetax Parent's return information not available. Freetax   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). Freetax How to request. Freetax   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. Freetax (The IRS cannot process a request received before the end of the tax year. Freetax )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. Freetax   The request must contain all of the following. Freetax A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. Freetax Proof of the child's age (for example, a copy of the child's birth certificate). Freetax Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). Freetax The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. Freetax    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. Freetax Step 1. Freetax Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Freetax To do that, use Form 8615, Part I. Freetax Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Freetax Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Freetax Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Freetax If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Freetax However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. Freetax Alternate Worksheet for Form 8615, Line 1 A. Freetax Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Freetax Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. Freetax Enter this total as a positive number (greater than zero)   C. Freetax Add line A and line B and  enter the total   D. Freetax Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. Freetax Subtract line D from line C. Freetax Enter the result here and on Form 8615, line 1   Unearned income defined. Freetax   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Freetax It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. Freetax Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Freetax Nontaxable income. Freetax   For this purpose, unearned income includes only amounts the child must include in gross income. Freetax Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Freetax Capital loss. Freetax   A child's capital losses are taken into account in figuring the child's unearned income. Freetax Capital losses are first applied against capital gains. Freetax If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. Freetax Any difference over $3,000 is carried to the next year. Freetax Income from property received as a gift. Freetax   A child's unearned income includes all income produced by property belonging to the child. Freetax This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Freetax   A child's unearned income includes income produced by property given as a gift to the child. Freetax This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Freetax Example. Freetax Amanda Black, age 13, received the following income. Freetax Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. Freetax Amanda's unearned income is $2,100. Freetax This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Freetax Her wages are earned (not unearned) income because they are received for work actually performed. Freetax Her tax-exempt interest is not included because it is nontaxable. Freetax Trust income. Freetax   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Freetax   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Freetax See the Form 8615 instructions for details. Freetax Adjustment to income. Freetax   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. Freetax Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. Freetax If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. Freetax Directly connected. Freetax   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Freetax These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Freetax    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Freetax Only the amount greater than 2% of the child's adjusted gross income can be deducted. Freetax See Publication 529, Miscellaneous Deductions, for more information. Freetax Example 1. Freetax Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. Freetax His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Freetax Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. Freetax Example 2. Freetax Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Freetax She has no other income. Freetax She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. Freetax Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Freetax The amount on line 2 is $2,050. Freetax This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Freetax Line 3 Subtract line 2 from line 1 and enter the result on this line. Freetax If zero or less, do not complete the rest of the form. Freetax However, you must still attach Form 8615 to the child's tax return. Freetax Figure the tax on the child's taxable income in the normal manner. Freetax Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Freetax Child files Form 2555 or 2555-EZ. Freetax   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. Freetax Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. Freetax Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Freetax Enter on Form 8615, line 5, the smaller of line 3 or line 4. Freetax This is the child's net unearned income. Freetax If zero or less, do not complete the rest of the form. Freetax However, you must still attach Form 8615 to the child's tax return. Freetax Figure the tax on the child's taxable income in the normal manner. Freetax Step 2. Freetax Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Freetax The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Freetax When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Freetax For example, do not refigure the medical expense deduction. Freetax Figure the tentative tax on Form 8615, lines 6 through 13. Freetax Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. Freetax If the parent's taxable income is zero or less, enter zero on line 6. Freetax Parent files Form 2555 or 2555-EZ. Freetax   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. Freetax Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. Freetax Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Freetax Do not include the amount from line 5 of the Form 8615 being completed. Freetax (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. Freetax ) Example. Freetax Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Freetax The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Freetax Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Freetax Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Freetax Other children's information not available. Freetax   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Freetax Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Freetax Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. Freetax You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Freetax Net capital gain. Freetax   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. Freetax If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. Freetax Qualified dividends. Freetax   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Freetax Net capital gain and qualified dividends on line 8. Freetax   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. Freetax   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. Freetax   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. Freetax   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Freetax   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Freetax See the instructions for Form 8615 for more details. Freetax Note. Freetax The amount of any net capital gain or qualified dividends is not separately reported on line 8. Freetax It is  needed, however, when figuring the tax on line 9. Freetax Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. Freetax If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. Freetax But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. Freetax If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. Freetax For details, see the instructions for Form 8615, line 9. Freetax However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. Freetax But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Freetax Child files Form 2555 or 2555-EZ. Freetax   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. Freetax Using the Schedule D Tax Worksheet for line 9 tax. Freetax    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. Freetax If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. Freetax Then figure the line 9 tax using another Schedule D Tax Worksheet. Freetax (Do not attach this Schedule D Tax Worksheet to the child's return. Freetax )   Complete this Schedule D Tax Worksheet as follows. Freetax On line 1, enter the amount from Form 8615, line 8. Freetax On line 2, enter the qualified dividends included on Form 8615, line 8. Freetax (See the earlier discussion for line 8. Freetax ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. Freetax On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. Freetax If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Freetax On lines 5 and 6, follow the worksheet instructions. Freetax On line 7, enter the net capital gain included on Form 8615, line 8. Freetax (See the earlier discussion for line 8. Freetax ) On lines 8 through 10, follow the worksheet instructions. Freetax On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). Freetax Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. Freetax Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Freetax If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. Freetax Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Freetax Determine whether there is a line 8 capital gain excess as follows. Freetax Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. Freetax (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Freetax ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Freetax Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Freetax If the result is more than zero, that amount is the line 8 capital gain excess. Freetax If the result is zero or less, there is no line 8 capital gain excess. Freetax If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Freetax If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. Freetax (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Freetax ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Freetax Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. Freetax If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. Freetax If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. Freetax Complete lines 12 through 45 following the worksheet instructions. Freetax Use the parent's filing status to complete lines 15, 42, and 44. Freetax Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line
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Freetax Publication 523 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Freetax Tax questions. Freetax Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 523, such as legislation enacted after it was published, go to www. Freetax irs. Freetax gov/pub523. Freetax Reminders Change of address. Freetax  If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Freetax Mail it to the Internal Revenue Service Center for your old address. Freetax (Addresses for the Service Centers are on the back of the form. Freetax ) Home sold with undeducted points. Freetax  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. Freetax See Points in Publication 936, Home Mortgage Interest Deduction. Freetax Photographs of missing children. Freetax  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Freetax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Freetax You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Freetax Introduction This publication explains the tax rules that apply when you sell your main home. Freetax In most cases, your main home is the one in which you live most of the time. Freetax If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Freetax See Excluding the Gain , later. Freetax Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Freetax If you have gain that cannot be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. Freetax You may also have to complete Form 4797, Sales of Business Property. Freetax See Reporting the Sale , later. Freetax If you have a loss on the sale, you generally cannot deduct it on your return. Freetax However, you may need to report it. Freetax See Reporting the Sale , later. Freetax The main topics in this publication are: Figuring gain or loss, Basis, Excluding the gain, Ownership and use tests, and Reporting the sale. Freetax Other topics include: Business use or rental of home, Deducting taxes in the year of sale, and Recapturing a federal mortgage subsidy. Freetax Net Investment Income Tax (NIIT). Freetax   If any part of the gain on the sale of a home is not excluded under the rules discussed in this publication, it may be subject to the NIIT. Freetax For more details, see Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions. Freetax Worksheets. Freetax   Near the end of this publication you will find worksheets you can use to figure your gain (or loss) and your exclusion. Freetax Use Worksheet 1 to figure the adjusted basis of the home you sold. Freetax Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. Freetax If you do not qualify for the maximum exclusion, use Worksheet 3 to figure your reduced maximum exclusion. Freetax Date of sale. Freetax    If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. Freetax If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. Freetax In most cases, these dates are the same. Freetax What is not covered in this publication. Freetax   This publication does not cover the sale of rental property, second homes, or vacation homes. Freetax For information on how to report any gain or loss from those sales, see Publication 544, Sales and Other Dispositions of Assets. Freetax Comments and suggestions. Freetax   We welcome your comments about this publication and your suggestions for future editions. Freetax   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Freetax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Freetax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Freetax   You can send your comments from www. Freetax irs. Freetax gov/formspubs/. Freetax Click on “More Information” and then on “Comment on Tax Forms and Publications”. Freetax   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Freetax Ordering forms and publications. Freetax   Visit www. Freetax irs. Freetax gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Freetax Internal Revenue Service 1201 N. Freetax Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Freetax   If you have a tax question, check the information available on IRS. Freetax gov or call 1-800-829-1040. Freetax We cannot answer tax questions sent to either of the above addresses. Freetax Useful Items - You may want to see: Publication 527 Residential Rental Property 530 Tax Information for Homeowners 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 551 Basis of Assets 587 Business Use of Your Home 936 Home Mortgage Interest Deduction 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 1040 U. Freetax S. Freetax Individual Income Tax Return 1040NR U. Freetax S. Freetax Nonresident Alien Income Tax Return 1040X Amended U. Freetax S. Freetax Individual Income Tax Return 1099-S Proceeds From Real Estate Transactions 4797 Sales of Business Property 5405 Repayment of the First-Time Homebuyer Credit 8822 Change of Address 8828 Recapture of Federal Mortgage Subsidy 8939 Allocation of Increase in Basis for Property Acquired From a Decedent 8949 Sales and Other Dispositions of Capital Assets W-2 Wage and Tax Statement See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Freetax Prev  Up  Next   Home   More Online Publications