Children's Returns
& Kiddie Tax

Filing obligations for minors

A dependent child must file a tax return if their unearned income exceeds $1,350 in 2026, or if their earned income exceeds the standard deduction for dependents. Professional guardians and fiduciaries managing investment accounts, UTMA assets, or inherited property on behalf of a minor frequently trigger this threshold without realizing it. The filing obligation falls on whoever has legal authority over the child's financial affairs.

Kiddie tax (Form 8615)

The kiddie tax rules under Section 1(g) tax a child's unearned income above $2,700 (2026) at the parent's marginal rate rather than the child's rate. The rules apply to children under 18, children age 18 whose earned income does not exceed half their support, and full-time students ages 19 through 23 in the same situation.

Form 8615 requires the parent's taxable income to compute the child's tax. This creates an interdependency between the child's return and the parent's return: neither can be finalized independently. When the guardian or fiduciary is not also preparing the parent's return, coordination with the parent's preparer is required. We manage that coordination across all parties.

UTMA and UGMA accounts

Income generated by custodial accounts, including dividends, interest, and capital gains distributions, is taxable to the child and subject to the kiddie tax rules. If the fiduciary or guardian is the custodian of the UTMA or UGMA account, the filing obligation is theirs. When the child reaches the age of majority and the account transfers outright, there may be additional tax considerations around the transfer of the custodial assets.

Trust and estate K-1s issued to minors

When a trust or estate distributes income to a minor beneficiary, the K-1 income flows to the child's return and is subject to the kiddie tax. The timing and character of distributions directly affect the overall tax burden across the entity, the child, and the parent. If you are the trustee or executor making distributions to minor beneficiaries, the distribution strategy should account for the kiddie tax impact before distributions are made.

We prepare the entity return and the child's return together so the distribution deduction on the Form 1041 ties to the K-1 income on the child's return, and the Form 8615 kiddie tax calculation references the correct figures from the parent's return. Filing them as a coordinated group prevents mismatches.

Form 8814 election

In some cases, the parent may elect to report a child's investment income directly on their own return using Form 8814, eliminating the need for a separate return for the child. This election simplifies the filing process but may result in higher overall tax, particularly when state tax rules or the kiddie tax calculation are involved. We evaluate both approaches and recommend whichever produces the lowest total tax across all returns.

Inherited assets held by minors

Children who inherit assets, directly or through a trust, receive the same stepped-up basis as any other beneficiary. The ongoing income from those inherited assets (dividends, interest, rents) is subject to the kiddie tax. When the guardian or fiduciary is managing inherited property on behalf of a minor, we track the basis from the date of death and handle the reporting on each year's return.

What we handle

• Filing the child's federal and state returns under the guardian's or fiduciary's authority
• Form 8615 kiddie tax calculation, coordinated with the parent's return
• UTMA and UGMA account income reporting
• K-1 reporting from trusts, estates, and partnerships distributing to minors
• Coordinated preparation of the entity return (Form 1041) and the child's return
• Form 8814 election analysis when the parent election may be beneficial
• Basis tracking for inherited assets held by the minor

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