Form 8814: Parent's Election to Report Child's Interest and Dividends
Quick answer: Form 8814 allows parents to report their child's investment income (interest and dividends) on their own tax return instead of filing a separate return for the child. This election is available when the child's investment income is less than $2,700 and gross income doesn't exceed $13,500 (2025 limits).
In this article, we will provide an overview of Form 8814, including who can file it, when it should be filed, and how to fill it out.
What is Form 8814?
Form 8814 is a tax form used to report a child's investment income on a parent's tax return. When a child has investment income above a certain threshold, they are required to file their own tax return.
This threshold amount changes each year and is set by the Internal Revenue Service (IRS).
For tax year 2025, the threshold amount is $2,700. This means that if a child has investment income higher than or equal to $2,700, they will be required to file their own tax return.
However, parents have the option to include the child's investment income on their own tax return by filing Form 8814.
This is a convenient option for parents, as it allows them to report their child's income on the same tax return as their own, simplifying the filing process.
Who can elect to file Form 8814 and when?
Parents can elect to file Form 8814 if all of the following conditions are met:
| Requirement | Details |
|---|---|
| Child's age | Under 19 years old, OR under 24 if a full-time student |
| Income type | Only interest and dividends (no wages, self-employment, or other income) |
| Investment income limit | Gross income less than $13,500 for the 2025 tax year |
| Unearned income threshold | At least $2,700 in unearned income requires filing |
| Marital status | A child cannot file a joint return |
| Dependency status | The child must be claimed as a dependent on the parent's return |
| Parent filing status | Parent files Form 1040, 1040-SR, or 1040-NR |
Form 8814 must be filed along with the parent's tax return and must be submitted by the tax filing deadline, which is usually April 15th of the following year.
If your child doesn't meet ALL of these requirements, they must file their own tax return using Form 8615 instead.
While Form 8814 simplifies filing, it often results in higher taxes than filing a separate return for your child. The IRS may charge up to $135 in additional tax, and your increased AGI can reduce valuable tax credits. Read the disadvantages below before deciding.
NOTE! Even if the child's investment income is below the threshold amount, it still needs to be reported on the parent's tax return. This can be done on Schedule B of Form 1040.
Important disadvantages of using Form 8814
While Form 8814 simplifies filing, it often costs more in taxes than filing separately for your child. Here are the key financial drawbacks:
1. Additional tax penalty (Up to $135)
The IRS charges up to $135 in additional tax when you use Form 8814. This occurs because qualified dividends and capital gains are taxed at 10% instead of the 0% rate they'd receive on your child's separate return.
Calculation: The next $1,350 of your child's income (between $1,350-$2,700) is taxed at 10% = $135 maximum.
Example: Child has $2,500 in qualified dividends → Form 8814 costs $115 vs. $0 if the child files separately.
2. Increased AGI reduces tax credits
Adding your child's income to your return increases your AGI, which can reduce or eliminate:
- Child tax credit: $50 reduction per $1,000 over $400K (married) or $200K (single)
- Education credits: Up to $2,500 American Opportunity or $2,000 Lifetime Learning Credit
- IRA deduction: Up to $7,000 deduction phases out starting at $123K AGI
- Student loan interest: Up to $2,500 deduction phases out starting at $155K AGI
Impact: If you're near any phase-out threshold, this can cost $50-$500 in lost benefits.
3. Permanently lost deductions
Your child loses these deductions (and you can't claim them either):
- An additional $1,550 standard deduction if the child is blind
- Early withdrawal penalties on savings accounts
- Investment interest expenses
- Charitable contributions made by a child
| Factor | Form 8814 | Child Files Separately |
|---|---|---|
| Tax on $1,350 qualified dividends | $135 | $0 |
| Impact on tax credits | $50-$500 reduction | No impact |
| Lost deductions | Up to $310 | Can claim |
| Filing complexity | 1 return (simpler) | 2 returns (more work) |
| Typical extra cost | $135-$600 | $0 (baseline) |
When to use each option
Use Form 8814 if:
- Child's income under $3,000 AND mostly ordinary interest
- Your AGI is $50,000+ below any credit phase-out
- No qualified dividends over $1,000
File separately if:
- Child has $1,500+ in qualified dividends or capital gains
- Your AGI is within $15,000 of the credit phase-outs
- Child has special deductions or income over $5,000
Solve your tax question – ask professionals
Overwhelmed by taxes? With the right information, it gets easier.
Submit your question, and you’ll receive an answer from tax experts within a few business days. While we can’t provide detailed consultations without reviewing your documents, we’ll do our best to assist.
What info is included on the Form 8814?
Form 8814 requires specific information from your child's tax documents:
- Child's identification: Full name and Social Security Number
- Parent's identification: Name(s) and Social Security Number
- Investment income details: All Forms 1099-INT (interest) and 1099-DIV (dividends and capital gains)
- Income calculation: Total investment income and the portion exceeding $2,700 base amount
The form calculates how much of the child's income is reported on your return and determines any additional tax owed (up to $135).
How to file Form 8814 (instructions)
To file Form 8814, follow these steps:
- Download and print a copy of Form 8814. The form can be found here below or - on the IRS website in the Forms and Publications section.
- Fill out the form with the required information, including the child's name, Social Security number, and investment income. Make sure that all the information is accurate and up to date.
- Calculate the portion of the child's investment income that will be reported on the parent's tax return. This is the amount that the parent is choosing to report on their tax return, and it cannot exceed the child's total investment income.
- Calculate the child's tax rate for the tax year, using the tax tables provided by the IRS. This is the tax rate that would have applied to the child's investment income if they had filed a separate tax return.
- Include the Form 8814 with the parent's tax return when it is filed. The completed Form 8814 must be attached to the parent's tax return, along with any other required forms and schedules.
NB! Form 8814 must be filed by the tax filing deadline, which is usually April 15th of the following year.
Form 8814 preview
Form 8814 vs Form 8615: Which should you use?
| Factor | Form 8814 (Parent Reports) | Form 8615 (Child's Return) |
|---|---|---|
| Who files | Parent are included on their return | Child files separate return |
| Income limit | Child's gross income < $13,500 | No limit, used when income exceeds the threshold |
| Income type | Only interest and dividends | All types of unearned income (including capital gains) |
| Age requirement | Under 19 (or 24 if a student) | Under 18, OR 18 with earned income < half of support, OR full-time student 19-23 |
| Tax rate applied | Parent's marginal tax rate | Combination of child's and parents' rates (kiddie tax) |
| Impact on AGI | Increases parent's AGI | No impact on parent's AG |
| Additional tax | Possible $0-$135 extra | Calculated based on parental rate |
| Complexity | Simpler (one return) | More complex (requires parent's tax info) |
| Best for | Under $3,000 ordinary interest only, AGI far from phase-outs | Over $1,500 qualified dividends, any capital gains, or protecting parent's tax credits |
When to choose each form
Use Form 8814 if:
- Child has less than $3,000 investment income
- Income is mostly ordinary interest (not qualified dividends)
- Your AGI is safely below credit phase-outs
- Simplicity is worth the potential $100-200 extra tax cost
Use Form 8615 (child files separately) if:
- Child has more than $1,500 in qualified dividends or capital gains
- Your AGI is near phase-out thresholds for tax credits
- Child has investment income over $5,000
- You want to minimize total family tax liability
To sum up
Form 8814 simplifies tax filing by allowing parents to report their child's investment income on their own return, but this convenience often comes at a financial cost. Before making this election, compare the tax outcome both ways - many families save $100 to $500 by having the child file separately.
Important: Ensure all eligibility criteria are met and consider consulting a tax professional if your child has more than $3,000 in investment income or if you're close to any AGI phase-out thresholds.
FAQ
Form 8814 is used by parents to report a child's investment income on their tax return. In contrast, Form 8615 is required when a child's investment income is high enough to necessitate filing their own tax return. Form 8615 calculates and reports the tax due on the child's investment income.
Using Form 8814 depends on your situation. If your child's investment income is below a certain threshold, you can opt to report it on your return using Form 8814. However, if the income exceeds this threshold, your child must file their own return using Form 8615. Consulting a tax professional or IRS guidelines is advisable to determine the best approach.
Yes. You can choose differently each tax year based on your situation. Using Form 8814 one year doesn't require you to use it in future years.
If your child has ANY earned income (wages, self-employment), you CANNOT use Form 8814. The child must file their own return, even if investment income is minimal.
No. Using Form 8814 doesn't affect your ability to claim the Foreign Earned Income Exclusion (FEIE), but the increased AGI may impact Foreign Tax Credit benefits.
You can use Form 8814 for UTMA/UGMA accounts as long as all other eligibility requirements are met. The key is that income must be only interest and dividends.
Only the custodial parent (parent with whom the child lived for more than half the year) can elect to use Form 8814. If parents are married filing separately, special rules apply.
The main disadvantages are: (1) Up to $135 additional tax penalty, (2) Increased AGI can reduce Child Tax Credit, education credits, and IRA deductions, (3) Loss of child's special deductions like blindness allowance, (4) Qualified dividends taxed at 10% instead of 0%. In most cases, filing separately for the child results in lower overall family taxes.
The IRS charges up to $135 in additional tax on the first $2,700 of your child's investment income when using Form 8814 (2025 tax year). The exact amount is calculated as 10% of the income between $1,350 and $2,700. This tax applies to qualified dividends and capital gains that would be taxed at 0% on the child's separate return.
Yes, Form 8814 increases your AGI by adding your child's investment income (minus $2,700). If your AGI exceeds $400,000 (married) or $200,000 (single), you lose $50 in Child Tax Credit for every $1,000 over the threshold. This can cost you $50-$200+ in lost credits, on top of the $135 Form 8814 penalty.
