How much can a dependent child earn in 2021 and still be claimed?
There are differing rules for dependents who have income either earned or unearned, and could lead to you footing the bill.
With tax filing season in full swing, there has never been a more important time to make sure your bookkeeping is in order.
Something that may go under the radar is what taxes children have to pay. For the majority of families it will be of no concern. However, children that have considerable money invested in their name will need to file taxes. It is certainly something to keep in mind this tax season.
Earned income only
A child must file a tax return if their earned income is more than the standard deduction. For this year's filing, the standard deduction for a dependent child is total earned income up to $12,550.
Anything earned, as in worked, under this does not need to be registered, but anything over does.
Unearned income only
A child must file a tax return if their unearned income is more than the $1,100.
If this value is under $11,000 then the unearned income can be declared on a parent's form. However, this counts towards a parent's tax, so if this money takes a parent over the next tax threshold then more money will have to be paid to the IRS.
Unearned income is income derived from investments, such as capital gains tax. This tax only comes into being once the asset has been sold.
If a dependent child has income from both avenues, then a return will need to be filed if: