Taxpayer asks:
My son wants to know when he’ll have to file for taxes, he started mowing lawns this summer and is getting paid $25 per yard.
Taxgirl says:
Wow, I feel old. I used to get paid $10/yard for biggish yards in the country. *sigh*
Whether your son will have to file and pay depends on a lot of things. The two most important issues are his age and exactly how many of those yards he mows (his income).
The so-called “kiddie tax” is a term to describe when a child may be taxed at his or her parents’ rate. It has been around for about 20 years now.
Here’s how it works: for 2008, children under 19 and full-time students under 24 with earned income which is less than to half of support may have up to $1,700 in unearned income, meaning income such as dividends and interest on investments (not wages) before the kiddie tax kicks in. The first $850 is exempt from taxation and the next $850 is taxed at the child’s income tax rate.
But. Unearned income over $1,700, tax is computed at the parent’s tax rate. Earned income (wages or pay for, say, mowing the grass) is taxed at the child’s tax rate.
If your child has unearned income of $8500, that income can be included on a parent’s return. Otherwise, the child should file an individual return (see the exemptions from tax above).
Before you rush to include your child’s income on your personal return, don’t forget that this would add to your own adjusted gross income. While you may consider it the same pile of money for purposes of paying the tax, it can subject you to phase-outs or other limits.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl!
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