From the IRS NEWSWIRE facts about investment income of children

The IRS wants parents to be aware of the tax rules that affect their children?s investment income. The following four facts will help parents determine whether their childs investment income will be taxed at the parents? rate or the childs rate.

1. Investment Income Children with investment income may have part or all of this income taxed at their parents? tax rate rather than at the childs rate. Investment income includes interest, dividends, capital gains and other unearned income.

2. Age Requirement The childs tax must be figured using the parents? rates if the child has investment income of more than $1,900 and meet one of three age requirements for 2009:

The child was born after January 1, 1992.
The child was born after January 1, 1991, and before January 2, 1992, and has earned income that does not exceed one-half of their own support for the year.
The child was born after January 1, 1986, and before January 2, 1991, and a full-time student with earned income that does not exceed one-half of the childs support for the year.
3. Form 8615 To figure the child’s tax using the parents? rate for the childs return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child’s federal income tax return.

4. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the childs income on the parent?s tax return. In this situation, the parent would file Form 8814, Parents’ Election To Report Child’s Interest and Dividends.