Finance Blog
Teens and Taxes: Do I Need to File Taxes?
Teens and Taxes: Do I Need to File Taxes?
By Eva Rosenberg
My brother and I have been working since we were in our early teens. Like many teens, not knowing anything about taxes, I just let my dad take care of any necessary filings until I moved out at age 18.
When Should You Start Filing Tax Returns?
Taxes are intensely more complicated today than they were when I started college and began filing my own tax returns. You can’t just jump into your own filings anymore without affecting your parents’ tax returns. There are kiddie tax rules and rules for students who may be dependents on their parents’ tax returns until they are 23 years old. It’s enough to make you scream!
There are two distinct situations to consider: teens with jobs and teens with investment income.
Teen with Jobs
As a teen or student, you may feel as if you are a protected class. We get discounts. Adult rules don’t apply to us. We don’t have to pay taxes. I know that’s how I felt.
Well…it doesn’t quite work that way.
“Exempt” is not the right choice to put on your employer’s W-4 form. Even if you earn as little as $3,650 in a year (from all sources), you are likely to face income taxes.
Freelance income is taxable even sooner. Once you have $400 in profit, you must pay self-employment (SE) taxes. That’s normally 15.3 percent of your profits. For only 2011, SE tax has dropped to 13.3 percent.
When reporting income on Schedule C, you can deduct your business-related expenses. If you are paying for your own Internet service, hosting, software, texting, supplies, etc., your freelance earnings of $1,200 might be reduced to less than $400.
When you file your own tax return, be sure NOT to claim yourself as a dependent. Kids under age 18 are always dependents on their parents’ tax returns. Students under age 24 suffer the same fate.
Teens with Investment Income
Parents and grandparents can be very generous, giving you gifts of money or stocks. Since that was a clever way for parents to move profits to a lower tax bracket, Congress closed that loophole, taxing the investment income of children under 18 at their parents’ highest tax rates. Recently, Congress raised the age limit to 24 for students who are still dependents of their parents.
The Tax Code has a unique definition of investment income for children. It doesn’t mean just dividends, interest, and capital gains. It turns out that for children, “investment income” is any income that isn’t wages or self-employment income.
If you have investment income of $1,900 or more, you need to either file your own tax return using Form 8615 or have your parents report your income on their tax return using Form 8814.
The Bottom Line
It’s good to get the experience of preparing your own tax returns, and it’s important to know when you have an obligation to file a tax return. However, it’s wise to coordinate your filings with your parents—and to have your parents review your tax returns before you file.
Skip the Allowance and Hire Your Child
Celebrity Tax Scandals
Temporary Work for Fun, Profit, and Retirement
How to Ensure You Get Audited
Medical Tax Deductions Are Worth More Than You Think
5 comments
Leave a Comment
We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.
Some other factors to consider when commenting:
- Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
- All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
- We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
- Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
- Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
- Stay on topic. Your comment should be concise and pertain to the specific post in question.
- Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
- Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.
RSS Feeds
My granddaughter has a job and living with their parent.She has just turn 18.What kind of form does she need.or can her parients file on her with her taxes?Love to get answer from you .Thank you for all the help.
Thanks for reading. Teens and taxes can vary a great deal, as the blog post explains. To figure out what your granddaughter needs to do for her taxes, she’ll need to talk to her parents about if they want to claim her as a dependent and how much money your granddaughter makes. See the above blog post for more information. Thanks for your comment, and we hope to hear from you on the blog again soon.
Well im 14 and i wanted to know if i start to work with a permit can my mom still file a tax return
i would like know if teens pay taxes or not?
if a teen turns 18 and has no income, do they need to file a tax return?