Does my child have to file a tax return? 2024 Update

Blast from the past! Who doesn't recall their earliest gigs as a young, up and comer, the babysitting, table-waiting, or the crack of dawn newspaper deliveries? Back then, worrying about tax returns was probably a distant thought. Fast forward to today, though, and it's a different story. As we transition into the role of parents, that intriguing question might crop up: “Does my child need to deal with filing taxes?”

Here's the lowdown (based on 2024 guidelines): if your child is a dependent on your tax return, there are certain thresholds they must surpass to require a tax filing.

These thresholds include:

1. exceeding $1,300 in unearned income (like dividends or interest),

2. earning more than $14,600 from labor (like wages),

3. or totaling gross income that exceeds the larger

   i. of $1,300 or

   ii. their earned income (up to $14,150) plus $450.

In most situations, a child going to school full-time and working a part-time job a few hours a week will not have a filing requirement, but there may still be a reason to file.

Sounds complicated, right? Well, let’s look at some examples:

Meet John, 20, juggling school and part-time work at the campus bookstore. John qualifies as a dependent. With an earned income of $6,000 from his job and $550 in interest, John falls below the $14,600 earned income threshold (#2) but exceeds the total gross income limit (#3) outlined earlier ($6,000 earned + $550 unearned = $6,550, which is more than $6,450 ($6,000 earner + $450)). Therefore, John has to file taxes for 2024.

On the flip side, Sally, a 16-year-old barista, earned $5,000 in 2024 and has no unearned income. She qualifies as a dependent, and since she falls below the $14,600 earned income threshold and has no federal income taxes withheld, filing isn't mandatory. However, if Sally had taxes withheld, she'd need to file to claim those as a refund.

Let's shift our focus to Tim, a 13-year-old who raked in $1,500 from taxable interest and dividends but had no earned income. As a dependent on his parent’s return, he crosses the threshold for unearned income ($1,300). Consequently, he must file a tax return. Although there's a twist for children with dividends and interest under $11,000 (in 2024)—parents can choose to include this income on their own tax return, potentially affecting their tax liability. This option should be discussed with a tax professional to see which option is best.

Lastly, if your child is rocking the contractor life, getting a Form 1099-NEC rather than a Form W-2, and the net earnings (income minus expenses) top $400, brace yourselves for self-employment taxes (Social Security and Medicare). This means they'll need to file, regardless of the earned or unearned income situations.

Phew! Trying to figure out if your child needs to file taxes can be quite the head-scratcher. If you are still unsure about your situation, and want expert advice, you can click this link to set an appointment to speak with a Tax Expert from Lisa Brugman, EA & Associates.