Kiddie Tax

[Danjos]

Full time Student age 22 (single) has Apporx. 50,000.00 of Div. int. and Cap Gains. Approx. 1800.00 from wages. Lives with parents other than college, and Pays own tuition of Approx. 30M and uses the income for support. If he meets the support test can he claim himself and not be subject to the kiddie tax?

[Koss]

Re: Form 8615

If he is providing more than half of his own support, then he can and should claim his own exemption, since he does not qualify as a dependent of another taxpayer.

However, the fact that he is not a dependent does not determine whether the Kiddie Tax is applicable.

The Kiddie Tax is applicable to any child who meets all of the following conditions:

1. The child had more than $2,000 of unearned
income.

2. The child is required to file a tax return.

3. The child either:

a. Was under age 18 at the end of 2013, or
b. Was age 18 at the end of 2013 and did not have
earned income that was more than half of the child's
support, or
c. Was over age 18 and under age 24 at the end of
2013, was a full-time student, and did not have earned
income that was more than half of the child's support.

4. At least one of the child's parents was alive at the
end of 2013.

5. The child does not file a joint return for 2013.

Note that Condition #3 can be met by one of three possibilities. Your client appears to meet all five conditions, because he meets option C under Condition #3.

BMK

[Danjos]

Kiddie tax

Hi Mr. Koss,
thanks for the reply. In other words you are telling me that the kiddie tax will apply to this taxpayer. If he claims himself does he still fill out for 8615? Appreciate your response.
Many thanks Again.

[Koss]

Form 8615

Yes, he will still file Form 8615.

BMK

[Danjos]

kiddie Tax

Mr. Ross;

I appreciated your patience with me. I assume this taxpayer will then be eligible for the education credit i.e. American Opportunity credit form 8853.
Thanks Again.
DJS

[Koss]

Education Credit

I am assuming that he is not a dependent of his parents or anyone else. In your original post, you implied that he is providing more than half of his own support.

If that is the case, then yes, he can claim the American Opportunity Credit, but not the refundable portion.

The same rules that make him subject to the Kiddie Tax also prohibit him from claiming the refundable AOC.

Here's what it says in IRS Publication 970:

- - - - -

Refundable Part of Credit

Forty percent of the American opportunity credit is refundable for most taxpayers. However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only.

You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you.

1. You were:

a. Under age 18 at the end of 2013, or

b. Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or

c. Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below).

2. At least one of your parents was alive at the end of 2013.

3. You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013.

- - - - -

BMK