Question

Max is a 14-year-old dependent of his parents. During 2019, Max earned $1,800 working part-time jobs, and he received $1,500 of interest income from corporate bonds that were given to him last year. What is Max's 2019 taxable income? How much of Max's income is subject to the Kiddie Tax?

* Note: Please provide the calculations for your answer. Thanks!!!

Answer 1

His ears earned income is $ 1,800 and unearned interest income is $ 1,500

1) Child taxable income = Child's net earned income + Child's net unearned income - Child's standard deduction

2) Standard deduction is greater of $ 1,100 or the sum of $ 350 plus children earned income i.e $ 350 + $ 1,800 = $ 2,150. So, here standard deduction amount is $ 2,150

3) Taxable income of the child = earned income + unearned income - standard deduction

Taxable income of the child = $ 1,800 + $ 1,500 - $ 2,150 = 1,150

3) Net unearned income = unearned income - kiddie tax threshold

Net unearned income = $ 1,500 - $ 1,500 ( maximum of $ 2,200) = $ 0

4) Earned taxable income = Taxable income - Net unearned income

Earned taxable income = $ 1,150 - $ 0 = $ 1,150

5) Child tax liability = $ 1,150 X 10% = $ 115