Publication 929 - Tax Rules For Children And Dependents

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Figure 1. Can You Include Your Child’s Income On Your Tax

No estimated tax payment was made for

Return?

2006 and no 2005 overpayment was ap-

plied to 2006 under your child’s name and

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social security number.

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No federal income tax was taken out of

Was your child under age 18 at

your child’s income under the backup with-

the end of 2006?

holding rules.

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You are the parent whose return must be

Yes

used when applying the special tax rules

for children under age 18. (See Which

Parent’s Return To Use, earlier.)

Is your child required to file a tax return for

2006 if you do not make this election?

These conditions are also shown in Figure 1.

Yes

How to make the election. Make the election

by attaching Form 8814 to your Form 1040 or

Yes

Form 1040NR. (If you make this election, you

Is your child filing a joint return for 2006?

cannot file Form 1040A or Form 1040EZ.) At-

tach a separate Form 8814 for each child for

whom you make the election. You can make the

election for one or more children and not for

others.

Was the child’s only income interest and

dividends (including capital gain

Effect of Making

distributions and Alaska Permanent Fund

dividends)?

the Election

Yes

The federal income tax on your child’s income

may be more if you make the Form 8814 elec-

tion.

Was the child’s income less than

$8,500?

Rate may be higher. If your child received

qualified dividends or capital gain distributions,

Yes

you may pay up to $42.50 more tax if you make

this election instead of filing a separate tax re-

Yes

turn for the child. This is because the tax rate on

Did the child make any estimated tax

the child’s income between $850 and $1,700 is

payments for 2006?

10% if you make this election. However, if you

file a separate return for the child, the tax rate

may be as low as 5% because of the preferential

tax rates for qualified dividends and capital gain

Did the child have an overpayment of tax

Yes

distributions.

on his or her 2005 return applied to the

2006 estimated tax?

Deductions you cannot take. By making the

Form 8814 election, you cannot take any of the

following deductions that the child would be

entitled to on his or her return.

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The higher standard deduction for a blind

Yes

Was any federal income tax withheld from

child.

the child’s income (backup withholding)?

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The deduction for a penalty on an early

withdrawal of your child’s savings.

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Itemized deductions (such as your child’s

investment expenses or charitable contri-

Are you the parent whose return must be

butions).

used?*

Deductible investment interest. If you use

Yes

Form 8814, your child’s investment income is

considered your investment income. To figure

the limit on your deductible investment interest,

You can include your child’s income on

You cannot include

add the child’s investment income to yours.

your tax return by completing Form 8814

your child’s income

However, if your child received qualified divi-

and attaching it to your return. If you do,

on your return.

your child is not required to file a return.

dends, capital gain distributions, or Alaska Per-

manent Fund dividends, see chapter 3 of

Publication 550, Investment Income and Ex-

penses, for information about how to figure the

*See Which Parent’s Return To Use

limit.

Alternative minimum tax. If your child re-

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Reduced deductions or credits. If you use

Itemized deductions for medical expenses,

ceived tax-exempt interest from a private activity

Form 8814, your increased adjusted gross in-

casualty and theft losses, and certain mis-

bond, you must determine if that interest is a tax

come may reduce certain deductions or credits

cellaneous expenses.

preference item for alternative minimum tax

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on your return, including the following.

Total itemized deductions.

(AMT) purposes. If it is, you must include it with

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Deduction for contributions to a traditional

Personal exemptions.

your own tax preference items when figuring

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individual retirement arrangement (IRA).

Credit for child and dependent care ex-

your AMT. For more information, get the instruc-

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Deduction for student loan interest.

penses.

tions for Form 6251, Alternative Minimum Tax —

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Individuals.

Child tax credit.

Publication 929 (2006)

Page 7

Publication 929 - Tax Rules For Children And Dependents - 2006 Page 7

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