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 Previous Page: Publication 929 - Tax Rules for Children and Dependents - Parent's Election To Report Child's Interest and Dividends Next Page: Publication 936 - Home Mortgage Interest Deduction - Home Mortgage Interest DeductionUse to find additional instances of index items. |
Taxmap/pubs/p929-009.htm#TXMP4aa9b7c0 |
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Part of a child's 2004 investment income may be subject to tax at the parent's tax rate if all of the following statements are true.
If neither parent was alive on December 31, 2004, do not use Form 8615. Instead, figure the child's tax in the normal manner.
If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR.
The following discussions explain the parental information needed for Form 8615 and the steps to follow in figuring the child's tax.
Taxmap/pubs/p929-009.htm#TXMP14491be5 |
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On Form 8615, lines A and B, enter the parent's name and social security number. (If the parents filed a joint return, enter the name and social security number listed first on the joint return.) On line C, check the box for the parent's filing status.
See Which Parent's Return To Use, earlier, for a discussion of which parent's return information must be used on Form 8615.
Taxmap/pubs/p929-009.htm#TXMP776c23e6 |
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If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year.
Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2004 (January 1 – December 31). Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Kimberly must use the information on her mother's return for the tax year ending June 30, 2004, to complete her 2004 Form 8615.
Taxmap/pubs/p929-009.htm#TXMP3390d652 |
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If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates.
You can use any reasonable estimate. This includes using information from last year's return. If you use an estimated amount on Form 8615, enter "Estimated" on the line next to the amount.
When you get the correct information, file an amended return on Form 1040X, Amended U.S. Individual Income Tax Return.
Taxmap/pubs/p929-009.htm#TXMP62755f26 Extension of time to file. |
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Instead of using estimates, you can get an automatic 4-month extension of time to file if, by April 15, 2005, you file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You can file a paper Form 4868 or you can file it electronically. See the instructions for Form 4868 for details.
If you have an extension, you must file the child's return by August 15, 2005, unless you ask for and are granted an additional extension.
 | An extension of time to file is not an extension of time to pay. You must make an accurate estimate of the tax for 2004. If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. See Form 4868 and its instructions. |
Taxmap/pubs/p929-009.htm#TXMP6c6bf81b |
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If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS).
Taxmap/pubs/p929-009.htm#TXMP31e8f30b How to request. |
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After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. (The IRS cannot process a request received before the end of the tax year.)
 | You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. |
The request must contain all of the following.
A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship.
Figure 2. Do You Have To Use Form 8615 To Figure Your Child's Tax? Taxmap/pubs/p929-009.htm#TXMP382aa40d |
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The first step in figuring a child's tax using Form 8615 is to figure the child's net investment income. To do that, use Form 8615, Part I. For an example, see the Illustrated Part I of Form 8615 on the next page.
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If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Adjusted gross income is shown on line 37 of Form 1040; line 22 of Form 1040A; or line 35 of Form 1040NR. Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed.
If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form.
 | However, use the following worksheet if the child has excluded any foreign earned income or deducted a loss from self-employment or a net operating loss from another year. |
| Alternate Worksheet | ||
| for Line 1 of Form 8615 | ||
| A. | Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23 | |
| B. | Enter the total of any net loss from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. Enter this total as a positive number (greater than zero) | |
| C. | Add line A and line B and enter the total. | |
| D. | Enter the child's earned income plus any amount from line 33 of the child's Form 1040 or line 31 of the child's Form 1040NR. | |
| Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero) | ||
| E. | Subtract line D from line C. Enter the result here and on Form 8615, line 1 | |
Taxmap/pubs/p929-009.htm#TXMP600d7d31 |
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Investment income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, and certain distributions from trusts. Investment income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages).
Taxmap/pubs/p929-009.htm#TXMP60e82e05 Nontaxable income. |
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For this purpose, investment income includes only amounts the child must include in total income. Nontaxable investment income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included.
Taxmap/pubs/p929-009.htm#TXMP16389e53 Capital loss. |
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A child's capital losses are taken into account in figuring the child's investment income. Capital losses are first applied against capital gains. If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other investment income. Any difference over $3,000 is carried to the next year.
Taxmap/pubs/p929-009.htm#TXMP1873acee Income from property received as a gift. |
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A child's investment income includes all income produced by property belonging to the child. This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it.
A child's investment income includes income produced by property given as a gift to the child. This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act.
Amanda Black, age 13, received the following income.
Amanda's investment income is $1,900. This is the total of the dividends ($600), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Her wages are earned (not investment) income because they are received for work actually done. Her tax-exempt interest is not included because it is nontaxable.
Taxmap/pubs/p929-009.htm#TXMP10c369f4 Trust income. |
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If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other investment income from the trust are investment income to the child.
Taxmap/pubs/p929-009.htm#TXMP38518603 Adjustment to income. |
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In figuring the amount to enter on line 1, the child's investment income is reduced by any penalty on the early withdrawal of savings.
Taxmap/pubs/p929-009.htm#TXMP45c45eb6 |
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If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $1,600 on line 2.
If the child does itemize deductions, enter on line 2 the larger of:
Taxmap/pubs/p929-009.htm#TXMP6e177ed9 |
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Itemized deductions are directly connected with the production of investment income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees.
These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Only the amount greater than 2% of the child's adjusted gross income can be deducted. See Publication 529, Miscellaneous Deductions, for more information.
Roger, age 12, has investment income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his investment income. His adjusted gross income is $8,000, which is entered on Form 1040, line 37, and on Form 8615, line 1. Line 2 is $1,600 because that is more than the sum of $800 and his directly-connected itemized deductions of $300.
Eleanor, age 8, has investment income of $16,000 and an early withdrawal penalty of $100. She has no other income. She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her investment income. Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). The amount on line 2 is $1,850. This is the larger of:
Taxmap/pubs/p929-009.htm#TXMP1b1b85c6 |
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Subtract line 2 from line 1 and enter the result on this line. If zero or less, do not complete the rest of the form. However, you must still attach Form 8615 to the child's tax return. Figure the tax on the child's taxable income in the normal manner.
Taxmap/pubs/p929-009.htm#TXMP49ea4658 |
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Enter on line 4 the child's taxable income from Form 1040, line 42; Form 1040A, line 27; or Form 1040NR, line 39.
Taxmap/pubs/p929-009.htm#TXMP224c03c5 |
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A child's net investment income cannot be more than his or her taxable income. Enter on line 5 the smaller of line 3 or line 4 of Form 8615. This is the child's net investment income.
If zero or less, do not complete the rest of the form. However, you must still attach Form 8615 to the child's tax return. Figure the tax on the child's taxable income in the normal manner.
Taxmap/pubs/p929-009.htm#TXMP089e609e |
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The next step in completing Form 8615 is to figure a tentative tax on the child's net investment income at the parent's tax rate. The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net investment income (plus the net investment income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it.
When figuring the tentative tax at the parent's tax rate, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net investment income. For example, do not refigure the medical expense deduction.
Figure the tentative tax on lines 6 through 13. For an example, see the Illustrated Part II of Form 8615.
Taxmap/pubs/p929-009.htm#TXMP6f4ad9ff |
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Enter on line 6 the amount from the parent's Form 1040, line 42; Form 1040A, line 27; Form 1040EZ, line 6; TeleFile Tax Record, line K(1); Form 1040NR, line 39; or Form 1040NR-EZ, line 14. If the parent's taxable income is zero or less, enter zero on line 6.
Taxmap/pubs/p929-009.htm#TXMP50431c22 |
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If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Do not include the amount from line 5 of the Form 8615 being completed.
Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. The children's net investment income amounts on line 5 of their Forms 8615 are:
Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615.
Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000).
Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600).
Taxmap/pubs/p929-009.htm#TXMP0a7dec90 |
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If the net investment income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C).
Taxmap/pubs/p929-009.htm#TXMP72c10283 |
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Enter on this line the total of lines 5, 6, and 7. You must determine the amount of net capital gain and qualified dividends included on this line before completing line 9 of Form 8615.
Taxmap/pubs/p929-009.htm#TXMP5f91de8d Net capital gain. |
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Net capital gain is the smaller of the gain, if any, on Schedule D, line 15, or the gain, if any, on Schedule D, line 16. If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14.
Taxmap/pubs/p929-009.htm#TXMP77f0091f Qualified dividends. |
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Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR.
Taxmap/pubs/p929-009.htm#TXMP2c619af7 |
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If neither the child nor the parent nor any other child has net capital gain, the net capital gain on line 8 is zero.
If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero.
If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Use the Line 5 Worksheet in the instructions for Form 8615, line 8, to find these amounts.
Taxmap/pubs/p929-009.htm#TXMP400ef374 |
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Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions) or Schedule J (Form 1040), as follows.
Taxmap/pubs/p929-009.htm#TXMP03aebea7 |
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Use the Schedule D Tax Worksheet in the Schedule D instructions to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. Then figure the line 9 tax using another Schedule D Tax Worksheet. (Do not attach this Schedule D Tax Worksheet to the child's return.)
Complete this Schedule D Tax Worksheet as follows.
Taxmap/pubs/p929-009.htm#TXMP372b027c Figuring 28% rate gain (line 11). |
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If the child, parent, or any other child has 28% rate gain, figure the amount of 28% rate gain included in the net capital gain on line 8 using the following worksheet.
| Worksheet 1 for Line 11 of the Schedule D Tax Worksheet - 28% Rate Gain (Line 9 Tax) | ||
| 1. | Enter the amount , if any, from line 18 of the child's Schedule D. | |
| If line 1 is zero or blank, skip lines 2 through 4, enter -0- on line 5, and go to line 6. | ||
| 2. | Enter the amount from the last line of the child's completed Line 5 Worksheet in the instructions for Form 8615, line 8 | |
| 3. | Enter the amount from line 2 of the child's completed Line 5 Worksheet | |
| 4. | Divide line 2 by line 3. Enter the result as a decimal | |
| 5. | Multiply line 1 by line 4 | |
| 6. | If no other child has 28% rate gain, enter -0-. Otherwise, repeat lines 1 through 5 above for each other child who has 28% rate gain and enter the total of the line 5 amounts for those other children | |
| 7. | Enter the amount, if any, from line 18 of the parent's Schedule D. | |
| 8. | Add lines 5, 6, and 7. Also include this amount on line 11 of the Schedule D Tax Worksheet | |
Taxmap/pubs/p929-009.htm#TXMP107fc542 Figuring unrecaptured section 1250 gain (line 11). |
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If the child, parent, or any other child has unrecaptured section 1250 gain, figure the amount of unrecaptured section 1250 gain included in the net capital gain on line 8 using the following worksheet.
| Worksheet 2 for Line 11 of the Schedule D Tax Worksheet - Unrecaptured Section 1250 Gain (Line 9 Tax) | ||
| 1. | Enter the amount, if any, from line 19 of the child's Schedule D | |
| If line 1 is zero or blank, skip lines 2 through 4, enter -0-on line 5, and go to line 6. | ||
| 2. | Enter the amount, if any, from the last line of the child's completed Line 5 Worksheet in the instructions for Form 8615, line 8 | |
| 3. | Enter the amount from line 2 of the child's completed Line 5 Worksheet | |
| 4. | Divide line 2 by line 3. Enter the result as a decimal | |
| 5. | Multiply line 1 by line 4 | |
| 6. | If no other child has unrecaptured section 1250 gain, enter -0-. Otherwise, repeat lines 1 through 5 for each other child who has unrecaptured section 1250 gain and enter the total of the line 5 amounts for those children | |
| 7. | Enter the amount, if any, from line 19 of the parent's Schedule D | |
| 8. | Add lines 5, 6, and 7. Also include this amount on line 11 of the Schedule D Tax Worksheet | |
Taxmap/pubs/p929-009.htm#TXMP7d62a639 |
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Use Schedule J, Income Averaging for Farmers and Fishermen, to figure the line 9 tax on Form 8615 if Schedule J is used to figure the tax on the parent's return. First complete the actual Schedule J for the parent, then use another Schedule J as a worksheet to figure the tax to enter on line 9 of Form 8615. (Do not attach this worksheet to the child's return.)
Complete this worksheet Schedule J as follows.
Taxmap/pubs/p929-009.htm#TXMP1fcbe89a |
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Enter on line 10 the amount from the parent's Form 1040, line 43; Form 1040A, line 28 (minus any alternative minimum tax); Form 1040EZ, line 10; TeleFile Tax Record, line K (2); Form 1040NR, line 40; or Form 1040NR-EZ, line 15. Do not include the tax, if any, from Form 4972 or Form 8814.
Taxmap/pubs/p929-009.htm#TXMP48e66881 |
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Subtract line 10 from line 9 and enter the result on this line. This is the tentative tax.
If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Also skip the discussion for lines 12a and 12b that follows.
Taxmap/pubs/p929-009.htm#TXMP205aaaca |
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If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net investment income. This is done on lines 12a, 12b, and 13. Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b.
In the earlier example under Line 7 (Net Investment Income of Other Children), Sharon's Form 8615 shows $1,600 on line 7. The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). The decimal on line 12b is .333, figured as follows and rounded to three places.
formula Taxmap/pubs/p929-009.htm#TXMP1bc5ebe0 |
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If an amount is entered on line 7, multiply line 11 by the decimal on line 12b and enter the result on line 13. This is the child's share of the tentative tax.
Taxmap/pubs/p929-009.htm#TXMP37478eaa |
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The final step in figuring a child's tax using Form 8615 is to determine the larger of:
Taxmap/pubs/p929-009.htm#TXMP21aff8d0 |
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If lines 4 and 5 of Form 8615 are the same, the child's taxable income does not exceed the child's net investment income. Enter zero on lines 14 and 15, and go to line 16. Also skip the rest of this discussion and the discussion for line 15 that follows.
If lines 4 and 5 are not the same, subtract line 5 from line 4 and enter the result on line 14. Then, before completing line 15, you must determine the amount of net capital gain and qualified dividends, if any, included on line 14.
Taxmap/pubs/p929-009.htm#TXMP37d8fa29 |
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If the child does not have any net capital gain or qualified dividends, the amount of the net capital gain and qualified dividends included on line 14 is zero.
If the child has net capital gain, the amount of net capital gain included on line 14 is the amount from line 2 of the child's completed Line 5 Worksheet minus the amount from the last line of that worksheet. (See the earlier discussion for line 8 of Form 8615.)
If the child has qualified dividends, the amount of qualified dividends included on line 14 is the amount from line 1 of the child's completed Line 5 Worksheet minus the amount from the next to the last line of that worksheet. (See the earlier discussion for line 8 of Form 8615.)
Taxmap/pubs/p929-009.htm#TXMP1614835a |
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Figure the tax on the amount on line 14 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or Schedule J (Form 1040), as follows.
Taxmap/pubs/p929-009.htm#TXMP73d30b73 |
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Use the Schedule D Tax Worksheet in the Schedule D instructions to figure the line 15 tax on Form 8615 if the child has unrecaptured section 1250 gain or 28% rate gain. Do not attach this Schedule D Tax Worksheet to the child's return.
Complete this Schedule D Tax Worksheet as follows.
Taxmap/pubs/p929-009.htm#TXMP641a7928 |
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If Schedule J applies, use it as a worksheet to figure the tax to enter on line 15 of Form 8615. On line 1 of this worksheet, enter the amount from line 14 of Form 8615. Complete lines 2 through 22 following the Schedule J instructions. Use the child's filing status to complete lines 4, 8, 12, and 16.
Enter the amount from line 22 of this worksheet Schedule J on line 15 of Form 8615 and check the box on that line. Do not attach this worksheet to the child's return.
Taxmap/pubs/p929-009.htm#TXMP0afcd469 |
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Add lines 13 and 15 and enter the total on line 16. This is the child's tax figured at the parent's rate on net investment income and the child's rate on other income.
Taxmap/pubs/p929-009.htm#TXMP142bc06c |
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Figure the tax on line 4 (the child's taxable income). Use the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or the child's actual Schedule J, whichever applies. Enter the tax amount on line 17. If it is from the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or Schedule J, check the box on that line.
Taxmap/pubs/p929-009.htm#TXMP6b6e5962 |
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Enter on line 18 the larger of line 16 or line 17. Also enter this amount on the child's Form 1040, line 43; Form 1040A, line 28; or Form 1040NR, line 40. This is the child's tax.
Taxmap/pubs/p929-009.htm#TXMP7440a77f |
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A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. These items include accelerated depreciation and certain tax-exempt interest income. The AMT may also apply if the child has passive activity losses or certain distributions from estates or trusts.
For more information on who is liable for AMT and how to figure it, get Form 6251.
Taxmap/pubs/p929-009.htm#TXMP37a0a23a |
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Ordinarily, single people can subtract a $40,250 exemption amount from their AMT taxable income. However, a child who files Form 8615 has a limited exemption amount. The child's exemption amount for 2004 is limited to the child's earned income plus $5,750. Figure the child's allowable exemption amount on the worksheet in the instructions for line 29 of Form 6251.
Taxmap/pubs/p929-009.htm#TXMP7ccf9967 |
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This example shows how to fill out Forms 8615 and 1040A for Sara Brown. It also shows how to use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040A instructions to figure Sara's tax.
John and Laura Brown have one child, Sara. She is 13 and has $1,050 taxable interest, $1,050 qualified dividend income, $700 capital gain distributions, and $1,550 earned income. She does not itemize deductions. John and Laura file a joint return with John's name and social security number listed first. They claim three exemptions, including an exemption for Sara, on their return.
Because she is under age 14 and has more than $1,600 investment income, part of her income may be subject to tax at her parents' rate. A completed Form 8615 must be attached to her return.
Sara's father, John, fills out Sara's return. He completes her Form 1040A through line 27, then begins completing her Form 8615.
John enters his name and social security number on Sara's Form 8615 because his name and number are listed first on the joint return he and Laura are filing. He checks the box for married filing jointly.
He enters Sara's investment income, $2,800, on line 1. Sara does not itemize deductions, so John enters $1,600 on line 2. He enters $1,200 ($2,800 − $1,600) on line 3.
Sara's taxable income, as shown on line 27 of her Form 1040A, is $2,550. This is her total income ($4,350) minus her standard deduction ($1,800). Her standard deduction is limited to the amount of her earned income plus $250. John enters $2,550 on line 4.
John compares lines 3 and 4 and enters the smaller amount, $1,200, on line 5.
John enters $48,000 on line 6. This is the taxable income from line 42 of John and Laura's joint Form 1040 return. Sara is an only child, so line 7 is blank. He adds line 5 ($1,200), line 6 ($48,000), and line 7 (blank) and enters $49,200 on line 8.
Because Sara's capital gain distributions and qualified dividends are included on line 5, John uses Line 5 Worksheet #1 (in the instructions for Form 8615) to figure out that $300 net capital gain and $450 qualified dividends are included on line 5. He completes that worksheet as follows.
| Line 5 Worksheet #1 | ||
| 1. | Enter the child's qualified dividends | $1,050 |
| 2. | Enter the child's net capital gain | 700 |
| 3. | Enter the amount from the child's Form 8615, line 1 | 2,800 |
| 4. | Divide line 1 by line 3. Enter the result as a decimal (rounded to at least 3 places). Do not enter more than 1.000 | .375 |
| 5. | Divide line 2 by line 3. Enter the result as a decimal (rounded to at least 3 places). Do not enter more than 1.000 | .250 |
| 6. | Multiply $1,600 by line 4 | 600 |
| 7. | Multiply $1,600 by line 5 | 400 |
| 8. | Qualified dividends on Form 8615, line 5. Subtract line 6 from line 1 (but do not enter less than zero or more than the amount on Form 8615, line 5) | 450 |
| 9. | Net capital gain on Form 8615, line 5. Subtract line 7 from line 2 (but do not enter less than zero or more than the excess of Form 8615, line 5, over line 8 of this worksheet) | 300 |
Therefore, line 8 of Sara's Form 8615 also includes net capital gain of $300 and qualified dividends of $450. John uses the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040A instructions) and follows the instructions under Using the Qualified Dividends and Capital Gain Tax Worksheet for line 9 tax in the Form 8615 instructions to figure the tax to enter on line 9 of Sara's Form 8615.
John enters $450 on line 2 of the Qualified Dividends and Capital Gain Tax Worksheet, and $300 on line 3 of that worksheet. That completed worksheet is shown later as Filled-in Qualified Dividends and Capital Gain Tax Worksheet #1. John enters the tax of $6,594 on line 9 of Sara's Form 8615.
He enters the tax from his and Laura's Form 1040 ($6,489) on line 10 of Sara's Form 8615, subtracts that amount from the $6,594 on line 9, and enters the $105 remainder on line 11. Because line 7 is blank, John skips lines 12a and 12b and enters $105 on line 13.
John subtracts line 5 ($1,200) from line 4 ($2,550) and enters the result, $1,350 on line 14. Using the instructions for line 14 earlier, John subtracts the net capital gain included on line 5 ($300) from Sara's net capital gain ($700) to figure the $400 net capital gain included on line 14. He also subtracts the qualified dividends included on line 5 ($450) from Sara's qualified dividends ($1,050) to figure the $600 qualified dividends included on line 14. He uses another Qualified Dividends and Capital Gain Tax Worksheet and follows the instructions under Using the Qualified Dividends and Capital Gain Tax Worksheet for line 15 tax, in the Form 8615 instructions, to figure the $86 tax to enter on Form 8615, line 15. He completes that worksheet as shown on Filled-in Qualified Dividends and Capital Gain Tax Worksheet #2.
John adds lines 13 and 15 of Form 8615 and enters the sum, $191, on line 16. Then he uses another Qualified Dividends and Capital Gain Tax Worksheet to figure the $169 tax on Sara's $2,550 taxable income to enter on Form 8615, line 17. He completes that worksheet as shown on Filled-in Qualified Dividends and Capital Gain Tax Worksheet #3.
Finally, John compares lines 16 and 17 and enters the larger amount, $191, on line 18 of Sara's Form 8615. He also enters that amount on line 28 of Sara's Form 1040A.
John also completes Schedule 1, Form 1040A (not shown) for Sara.
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Filled-in Qualified Dividends and Capital Gain Tax Worksheet #1
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Filled-in Qualified Dividends and Capital Gain Tax Worksheet #2
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Filled-in Qualified Dividends and Capital Gain Tax Worksheet #3
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Glossary |
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Gross income (defined later) minus adjustments to income (defined next).
Deductions that are subtracted from gross income in figuring adjusted gross income. They include deductions for moving expenses, alimony paid, a penalty on early withdrawal of savings, and contributions to an individual retirement arrangement (IRA). Adjustments to income can be taken even if itemized deductions (defined later) are not claimed.
A tax designed to collect at least a minimum amount of tax from taxpayers who benefit from the tax laws that give special treatment to certain kinds of income and allow deductions and credits for certain kinds of expenses.
An allocated amount paid to, or treated as paid to, a shareholder by a mutual fund, regulated investment company, or real estate investment trust from its net realized long-term capital gains. This amount is in addition to any ordinary dividend paid to the shareholder. You will receive a statement from the payer if this applies to you.
A person, other than the taxpayer or the taxpayer's spouse, for whom an exemption (defined later) can be claimed. You can generally claim an exemption for a dependent if the dependent:
Salaries, wages, tips, professional fees, and other amounts received as pay for work actually done.
For purposes of determining a dependent's standard deduction, earned income also includes any part of a scholarship or fellowship grant that the dependent must include in his or her gross income.
An amount ($3,100 for 2004) that can be subtracted from income in figuring how much income will be taxed. Exemptions generally are allowed for the taxpayer, the taxpayer's spouse, and qualifying dependents.
All income from all sources (other than tax-exempt income) that must be included on your tax return.
See Unearned income, later, and Investment income defined, earlier, under Step 1. Figuring the Child's Net Investment Income (Form 8615, Part I).
Deductions allowed on Schedule A (Form 1040) for medical and dental expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous deductions. They are subtracted from adjusted gross income in figuring taxable income. Itemized deductions cannot be claimed if the standard deduction is chosen.
The excess of net long-term capital gain over any net short-term capital loss. For 2004, this is the smaller of the gain on line 15 or the gain on line 16 of Schedule D (Form 1040), Capital Gains and Losses. If Schedule D is not required, net capital gain is the amount of capital gain distributions on Form 1040, line 13, or Form 1040A, line 10.
The total of all investment income (other than tax-exempt income) reduced by the sum of the following: adjustments to income related to the investment income, plus the larger of:
Dividends eligible for the lower tax rates that apply to a net capital gain. They are reported to you in box 1b of Form 1099-DIV. On your tax return, you report them on line 9b of Form 1040 or Form 1040A. For more information, see Publication 550.
An amount (based on filing status, age, and blindness) that can be subtracted from adjusted gross income in figuring taxable income. The standard deduction of a dependent is subject to a limit based on earned income. The standard deduction is not used if itemized deductions are claimed.
The time period covered by a tax return. Usually this is January 1 to December 31, a calendar year, but taxpayers can elect a fiscal tax year with different beginning and ending dates.
Gross income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction.
Income other than earned income. This is investment-type income and includes interest, dividends, and capital gains. Distributions of interest, dividends, capital gains, and other unearned income from a trust are also unearned income to a beneficiary of the trust.
Generally, any part of your net capital gain from selling section 1250 property (real property) that is due to depreciation. For details, see Publication 550.
Gain from the sale of collectibles and half of the gain from the sale of qualified small business stock held more than 5 years. For details, see the instructions for Schedule D (Form 1040).
Taxmap/pubs/p929-009.htm#TXMP5bc72fd3 |
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You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
Taxmap/pubs/p929-009.htm#TXMP6c9e0fc2 |
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If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.
The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.
To contact your Taxpayer Advocate:
For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS—How To Get Help With Unresolved Tax Problems.
Taxmap/pubs/p929-009.htm#TXMP7dd1fda7 |
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To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.
 | Internet. You can access the IRS website 24 hours a day, 7 days a week, at www.irs.gov to:
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 | Fax. You can get over 100 of the most requested forms and instructions 24 hours a day, 7 days a week, by fax. Just call 703-368-9694 from the telephone connected to your fax machine. When you call, you will hear instructions on how to use the service. The items you request will be faxed to you. For help with transmission problems, call 703-487-4608. Long-distance charges may apply. |
 | Phone. Many services are available by phone.
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Yes.
No.