Do Dependent Minors Pay Taxes? Yes, in Some Cases
Regardless of how old your dependant child is or what they do to earn money, they may have to file a tax return if their earnings are above certain thresholds.
Jan. 16 2023, Published 12:45 p.m. ET
Is your child the entrepreneurial type that shovels snow or mows lawns to make a little extra cash? Or maybe your teenager just got their first job, and you’re wondering if they’ll have to file a tax return.
Regardless of how old your dependant child is or what they do to earn money, they may have to file a tax return if their earnings are above certain thresholds. The IRS rules on who must file a tax return are based on the amount of income they earn and not how old they are. Keep reading for all the details.
A child shoveling snow.
Do minors get taxes taken out of their paycheck?
Yes, if a minor child earns a paycheck, then state and federal taxes will most likely be taken out of their pay, just like it is for everyone else. However, if the minor earns less than the standard deduction, which is $12,950 for 2022, they can get the withheld taxes refunded by filing a tax return.
This applies to the minor’s “earned income,” which is the income they earn from working for themselves or someone else. So, if your dependent child has a job working at the local pizza place and they earned $12,000 in 2022, they can get a refund for the taxes withdrawn from their paycheck by filing a 2022 tax return.
Does my child pay taxes if they are self-employed?
Mowing lawns may be a good gig for kids to make extra money, but if they earn more than $400, they’ll need to pay taxes on those earnings. Any type of self-employment, like mowing lawns, shoveling snow, or doing odd jobs, is subject to a self-employment tax if the annual income earned from those jobs amounts to $400 or more. The self-employment tax is for Social Security and Medicare taxes.
A child mowing a lawn.
If your dependent child’s snow shoveling business brings in over $12,950, the standard deduction amount for 2022, then they will also be subject to state and federal taxes.
Do minors have to report unearned income?
Unearned income includes investments, social security benefits, unemployment compensation, trust distributions, and capital gains. If a dependent minor had more than $1,150 in unearned income in 2022, they would have to pay taxes.
Although it isn't likely a minor will be earning a lot from investments or social security benefits, if they buy collectibles and sell them for profit, they’ll then have to pay taxes on those profits (considered capital gains) if they earn more than $1,150 in profit from the sales.
A 1040 IRS form.
Should parents include a dependent child’s income on their tax return?
You may avoid the hassle and expense of filing a tax return for your dependent child by adding the child’s income to your tax return. You can claim a child’s income on your tax return if the child qualifies as your dependent. To be eligible as a dependent, the minor must live with you for more than half the year, receive more than half of their financial support from you, and be under age 19 for the tax year or 24 years old if they are a full-time student. Also, the dependent child’s gross 2022 income must be under $11,500.
Even if you can claim a dependent child’s income on your tax return, if their income pushes you into a higher tax bracket, you may want to consider filing a separate tax return for the minor.