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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7359
Experience:  15years with H & R Block. Divisional leader, Instructor
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I have a custodial account for my 11 year old daughter. The

Resolved Question:

I have a custodial account for my 11 year old daughter. The account contains a mutual fund as well as cash. Is my daughter liable for taxes on the income from the mutual fund? Will she be at age 18, when she will be in college?
Submitted: 11 months ago.
Category: Tax
Expert:  Robin D. replied 11 months ago.

Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
Your child is liable for any resulting taxes, although in some cases you can step in and assume responsibility yourself. Under some circumstances, you can save yourself the aggravation of having to prepare a separate tax return for your child by claiming the income from her custodial account on your own return. This is known as the Kiddie Tax.
You can only do this until the tax year in which your child turns 19, or 24 if she's a full-time college student.

Robin D. :

Under the kiddie tax, children pay tax at their own income tax rate on unearned income they receive up to a threshold amount . All unearned income kids receive above the threshold amount is taxed at their parent's highest income tax rate.

Robin D. :

The net effect is that you get the benefit of the child's lower tax rate only for unearned income over the standard deduction amount ($1,000 in 2013) and below the threshold amount ($2,000 in 2013). Everything else above the threshold amount is taxed at the parent's highest rate.

Robin D. :

Form 8615 is used if you decide this course. Here is a IRS page on this very subject
http://www.irs.gov/taxtopics/tc553.html

Customer:

I had previously been told a child is not taxed if she is a minor and does not work.

Robin D. :

That is not quite correct. The taxation on anyone is not just based on theri age but their income and that amount.

Robin D. :

their income*

Customer:

It was an accountant who told me that. I presume she knew the law. I was wondering about age 18.

Robin D. :

The accountant was not totally correct.


A dependent who has only unearned income must file a return if the total is more than the amount listed in the following table.













































Marital StatusAmount
Single
Under 65 and not blind$ 950
Either 65 or older or blind$2,400
65 or older and blind$3,850
Married*
Under 65 and not blind$ 950
Either 65 or older or blind$2,100
65 or older and blind$3,250
*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).

Robin D. :

If they are a minor and have unearned income over $950 they must file a return. Then the parent may be able to utilize the Kiddie tax as I advised previously.

Customer:

we file married joint. what is the effect?

Robin D. :

You can either file a return for your daughter or add her income to yours and show the unearned income (if it is more then $950)

Robin D. :

If it is not more than that she does not have to file and you do not have to add it to yours.

Robin D. :

Her age is only important when looking at the limits and if you notice that is only for older dependents.

Robin D. :

You can still claim her.

Robin D. :

If you do file a return for her instead then she does not claim herself and you still claim her as a dependent because legally she is your dependent.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7359
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and other Tax Specialists are ready to help you

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