A good way to teach your children about responsibility, business and money is to hire them to help with a family business. If the child is between the ages of seven and 18, they can earn up to $1,000 in 2014 before they will owe any income tax. As a business owner, you would get a business deduction and you would not have to pay Social Security or Medicare taxes for them.
- Kiddie Tax Amount: $2,000 for 2014
- Kiddie Tax Age: Applies to kids under 19, and dependent full-time students under age 24
To discourage parents from sheltering their income producing investments in the names of their children, the tax law has set some special rules for parent/child reporting:
- Investment income annual floor of $2,000
- Dependent child cannot claim personal exemption on their own return
- Limited standard deduction of $1,000 for children with investment income only
When does a child have to file?
A return must be filed for a dependent child if the child has investment income exceeding $350 and gross income of more than $1,000. If there's no investment income, the child can earn up to $6,200 before a tax return needs to be filed.
Standard Deduction for child's return?
The dependent child is allowed to claim a standard deduction of at least $1,000. If the child has additional earned income above $1,000, they can claim the full standard deduction up to those earnings (plus an additional $350) with a $6,200 maximum limit.
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