Form 8814: Parent's Election to Report Child's Interest & Dividends
Quick Summary
Form 8814 allows parents to report their child's interest and
dividend income on their own tax return instead of filing a
separate return for the child. This can simplify tax filing but
may result in higher taxes.
What is Form 8814?
Form 8814, officially titled "Parents' Election to Report Child's Interest and Dividends," is an IRS form that allows parents to include their child's unearned income (interest and dividends) on the parents' tax return rather than filing a separate tax return for the child.
This election is available when certain conditions are met and can simplify the tax filing process for families. However, it's important to understand when this option is beneficial and when it might increase your tax liability.
Form 8814 vs Form 8615: Which Should You Use?
| Criteria | Form 8814 | Form 8615 |
|---|---|---|
| Who Files? | Parents report on their return | Child files their own return |
| Child Age Limit | Under 19 (or under 24 if full-time student) | Under 18 (or under 24 if full-time student with earned income less than half of support) |
| Income Type & Amount | Only interest and dividends | Any type of unearned income |
| Income Limit | Less than $13,500 | No limit, but unearned income must exceed $2,600 |
| Tax Rate | First $1,300 tax-free, next $1,300 at parent's rate, remainder at parent's rate | First $1,300 tax-free, next $1,300 at child's rate, remainder at parent's rate |
Eligibility Requirements
To use Form 8814, your child must meet ALL of the following conditions:
- The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year
- The child's gross income was less than $13,500 (for 2024)
- The child's income consisted only of interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends)
- No estimated tax payments were made for the child, and no prior year overpayment was applied to the current tax year
- No federal income tax was withheld from the child's income
- The child is required to file a tax return only because their gross income exceeds the standard deduction
Important Note
The first $1,300 of your child's income is not reported on your return, but the next $1,300 is added to your income and taxed at 10%. Any amount over $2,600 is added to your income and taxed at your marginal tax rate.
Advantages and Disadvantages
Advantages
- •Simpler - no separate tax return for the child
- • Reduced paperwork and filing costs
- • May avoid filing requirement altogether
- •Easier record-keeping
Disadvantages
- •May result in higher taxes
- • Increases your adjusted gross income (AGI)
- •Could affect income-based tax credits
- •May impact financial aid eligibility
How to File Form 8814
Gather Information
Collect all 1099-INT, 1099-DIV, and other relevant tax documents for your child's investment income.
Complete Form 8814
Fill out a separate Form 8814 for each child whose income you're reporting. Enter the child's name, social security number, and income information.
Attach to Your Return
Attach the completed Form 8814 to your Form 1040 or 1040-SR. Include the calculated amounts in the appropriate lines on your tax return.
File Your Return
Submit your tax return with the attached Form 8814 by the regular filing deadline, typically April 15th.
NB! Form 8814 must be filed by the tax filing deadline, which is usually April 15th of the following year.
Form 8814 Preview
Form preview placeholder
The form includes two main parts: calculating the child's income to be reported and computing the tax on the first $2,600 of interest and dividends.
Deductions Your Child Loses When You File Form 8814
When you elect to report your child's income on your return using Form 8814, your child loses certain deductions and benefits that would have been available on their own return:
• An additional $1,550 standard deduction if the child is blind
• Early withdrawal penalties on savings accounts
• Investment interest expenses
• Charitable contributions made by a child
Example: Tax Cost Comparison
| Description | Using Form 8814 (Parent's Return) | Filing Separately (Child's Return) |
|---|---|---|
| Child's Investment Income | $3,500 | $3,500 |
| First $1,300 (Tax-Free) | -$1,300 | -$1,300 |
| Next $1,300 taxed at: | 10% = $130 | 10% = $130 |
| Remaining $900 taxed at: | 24% (parent) = $216 | 24% (parent) = $216 |
| Total Tax on Child's Income | $346 | $346 |
| Impact on Parent's AGI | +$2,200 | $0 |
| Child Can Claim Deductions: | No | Yes |
| Filing Complexity | Simpler | More Complex |
| Number of Tax Returns | 1 (Parent only) | 2 (Parent + Child) |
| Recommended For: | Simple situations, no special deductions | Higher income, special deductions, avoiding AGI impact |
Key Insight
While the direct tax on the child's income may be similar, Form 8814 increases the parent's AGI by $2,200, which could reduce eligibility for other tax credits and deductions (such as education credits, child tax credits, or premium tax credits).
Common Mistakes to Avoid
✗ Using Form 8814 when the child has earned income (wages, salaries) - this form is only for unearned income
✗ Forgetting to consider the impact on your AGI and how it affects other tax benefits
✗ Not comparing the tax liability using Form 8814 vs. filing a separate return for the child
✗ Using the form when estimated tax payments have been made for the child
To Sum Up
- Form 8814 can only be used for children's interest and dividend income under specific conditions
- The child must be under 19 (or 24 if a student) and have income less than $13,500
- While it simplifies filing, it may increase your tax liability and AGI
- Always compare the tax impact of using Form 8814 versus filing a separate return for your child
- Consider consulting with a tax professional to determine the best approach for your family
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