When minors earn unearned income that exceeds a certain threshold, the IRS requires them to file Form 8615. This form ensures that children’s unearned income is taxed at their parents’ rate rather than the child’s lower tax rate.
Filing Form 8615 correctly is crucial to avoid errors that might lead to penalties or audits. This guide will walk you through the filing process step by step, ensuring compliance with IRS regulations.
Table of Contents
What Is Form 8615?
Form 8615, Tax for Certain Children Who Have Unearned Income, is an IRS document used to report investment or passive income received by children under 18 (or under 24 if they are full-time students). This form prevents high-income families from shifting income to their children to take advantage of lower tax rates.
The IRS mandates Form 8615 for children who:
- Are under 18 (or under 24 and a full-time student)
- Have more than $2,500 in unearned income in 2025
- Must file a tax return
- Do not file a joint return with a spouse
Types of Income That Require Form 8615
Unearned income includes:
- Dividends and interest
- Capital gains distributions
- Taxable scholarships and grants
- Trust distributions
- Rental income
How to File Form 8615: Step-by-Step Instructions
Filing Form 8615 requires accurate reporting of a child’s unearned income and their parent’s tax rate. Here’s how to fill it out:
Step 1: Gather Necessary Documents
Before you begin, ensure you have:
- IRS Form 1040 for the child
- The parent’s tax return (Form 1040)
- Statements of unearned income (1099-DIV, 1099-INT, 1099-B)
Step 2: Fill in Basic Information
At the top of Form 8615, enter:
- The child’s name and Social Security Number (SSN)
- The parent’s name and SSN
- Filing status (single, married, filing jointly, etc.)
Step 3: Enter the Child’s Unearned Income
- Enter total unearned income from all sources.
- Subtract the $2,500 threshold (for 2025)
- This determines the portion of the child’s income that is subject to the parent’s tax rate.
Step 4: Compute Taxable Income
- The child’s earned income (if any) is taxed at their rate
- The unearned income above the $2,500 threshold is taxed at the parent’s highest tax bracket.
Step 5: Use the Parent’s Tax Rate
- Determine the parent’s highest tax rate.
- Apply this tax rate to the child’s taxable unearned income.
Step 6: Transfer the Tax to Form 1040
- Enter the calculated tax amount on the child’s Form 1040, Line 24
- Ensure all numbers match correctly.
Common Mistakes to Avoid When Filing Form 8615
- Not including all sources of unearned income: Ensure all investment and passive income sources are reported.
- Using the wrong tax rate: Double-check the parent’s tax bracket before applying it.
- Incorrect calculations: Errors in computing taxable income can result in IRS penalties.
When Should You File Form 8615?
Form 8615 is submitted alongside the child’s tax return (Form 1040) by the standard tax deadline:
- April 15, 2025 (or October 15 with an extension).
Late filing can result in penalties, so ensure it’s completed on time.
How Profitjets Can Help with Filing Form 8615
Navigating tax forms like Form 8615 can be challenging, especially when dealing with different income sources. Profitjets specializes in:
- Tax Services: Ensuring accurate tax filings for dependents and high-net-worth individuals.
- CFO Services: Strategic tax planning for families managing investment income.
- Bookkeeping Services: Tracking unearned income for accurate reporting.
If you need help with Form 8615, our experts are here to guide you.
Final Thoughts
Form 8615 ensures that unearned income for minors is taxed at the appropriate rate, preventing tax loopholes. By following this guide, you can accurately file the form and avoid IRS penalties. If you need expert help, Profitjets offers tax services, bookkeeping services, and CFO services to simplify the process.
