When Is Form 8615 Required: Thresholds and Parent’s Rate

Form 8615 is required for the 2026 tax year when a child’s unearned income is more than $2,700 and all of the following are also true: the child meets an age test, at least one parent was alive at year-end, the child is required to file a return, and the child is not filing a joint return.¹ The form calculates the “kiddie tax,” which taxes the child’s investment income above the threshold at the parent’s marginal rate instead of the child’s.

The Five Conditions in Detail

All five must be true. Miss one and the form is not required.¹

Unearned income exceeds $2,700 for 2026. This is the central trigger. At or below that figure, Form 8615 is not required regardless of the other conditions.²
The child meets an age test: under 18 at year-end; or age 18 with earned income that did not exceed half of their own support; or a full-time student at least 19 and under 24 with earned income that did not exceed half of their own support.
At least one parent was alive at the end of the tax year.
The child is required to file a return for the year.
The child is not filing a joint return.

The age 18 and full-time student categories trip up families. A teenager who turns 18 in December, worked a summer job, and did not cover half her own support is still inside the rule. So is a 22-year-old college senior whose custodial account throws off dividends while her parents pay most of the bills.³

What Counts as Unearned Income

Only unearned income counts toward the $2,700 threshold. The common categories are taxable interest, ordinary dividends, capital gain distributions, rents, and royalties. Trust distributions count. Taxable scholarships and fellowship grants count too, because the statute defines unearned income as any portion of adjusted gross income not attributable to compensation for personal services.³

Wages, tips, and self-employment income are earned income. They are taxed at the child’s own rate no matter how large, and they do not push a child into Form 8615 territory on their own. Only the unearned portion matters for the trigger.

Where the Income Usually Comes From

Most kids who cross $2,700 do so through a UGMA or UTMA custodial account funded by a parent or grandparent. Investments inside those accounts legally belong to the child, and the interest, dividends, and capital gains they generate are the child’s unearned income. A custodial account holding roughly $20,000 or more in mutual funds can produce enough taxable distributions to cross the threshold, particularly in a year with heavy capital gain payouts.

How the 2026 Threshold Works

For 2026, the child’s unearned income is taxed in three layers:²

The first $1,350 is not taxed. That figure matches the minimum standard deduction for a dependent.
The next $1,350 is taxed at the child’s own rate.
Everything above $2,700 is taxed at the parent’s marginal rate. This is the “net unearned income” the kiddie tax reaches.

A child with $5,000 in dividends pays nothing on the first $1,350, tax at her own rate on the next $1,350, and tax at the parent’s rate on the remaining $2,300. The $2,700 mark is where Form 8615 becomes mandatory because that is where the parent’s rate begins to apply.

The dollar figures adjust for inflation. If you are filing for an earlier year, the thresholds were lower: $2,700 for 2025 and $2,500 for 2023.²

Which Parent’s Rate Applies

For married parents filing jointly, the joint return sets the rate, and the child lists the parent whose name appears first on that return.⁴

When parents are divorced, separated, or never married, use these rules:

Divorced, custodial parent not remarried: use the custodial parent’s return.
Custodial parent remarried: the stepparent is treated as the child’s other parent. A joint return between them controls; if they file separately, use the return of whichever spouse has greater taxable income.
Parents never married but lived together all year: use the return of the parent with greater taxable income.
Parents never married and did not live together: apply the divorced-parent rules.

The noncustodial parent’s return is never used, even if that parent earns more.⁴

When Multiple Children Must File

If more than one child in the family must file Form 8615, the IRS does not compute each child’s tax in isolation. All the siblings’ net unearned income is combined, added to the parent’s taxable income, and used to figure a single tentative tax. That tentative tax is then split among the children in proportion to each one’s share of the total net unearned income.⁴

Each child’s Form 8615 must include the net unearned income amounts from every sibling who also files one. Miss a sibling and every child’s calculation comes out wrong.

When Form 8814 Can Replace Form 8615

Parents can sometimes avoid filing Form 8615 by electing on Form 8814 to report the child’s income on their own return. The election is only available when all of the following are true:⁵

The child was under 19 at year-end, or under 24 if a full-time student.
The child’s only income was interest and dividends, including capital gain distributions.
The child’s gross income was more than $1,350 but less than $13,500 for 2026.²
No estimated tax payments were made for the child, and no federal income tax was withheld from the child’s income.
The child is not filing a joint return.

Any earned income, trust distribution, royalty, or rental income disqualifies the election. In that case the child files her own return with Form 8615 attached.

The election also has costs. Adding the child’s income to the parent’s return raises the parent’s adjusted gross income, which can reduce or phase out the child tax credit, education credits, the earned income credit, and deductions for student loan interest or traditional IRA contributions. On top of that, income between $1,350 and $2,700 is taxed at a flat 10% under Form 8814 even when the underlying dollars are qualified dividends or capital gain distributions that would otherwise qualify for the 0% preferential rate on a separate return. The IRS estimates the rate difference can cost up to $135 per child.⁶

What Happens If You Skip It

Form 8615 is not optional when the conditions are met. Filing the child’s return without it produces tax at the child’s rate rather than the parent’s rate, which is an underpayment. The IRS can assess the shortfall with interest and a failure-to-pay penalty of 0.5% per month on the unpaid amount.

If the child’s return is not filed at all, the failure-to-file penalty runs 5% of the unpaid tax for each month late, up to 25%. For returns due after December 31, 2025, the minimum penalty for filing more than 60 days late is $525 or 100% of the tax owed, whichever is less.⁷

The common mistake is assuming a child with only investment income doesn’t need to file. A child with unearned income above $1,350 for 2026 generally must file a return, and once that income passes $2,700, Form 8615 has to come with it.²

1
Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax)
2
Internal Revenue Service. Rev. Proc. 2025-32
3
Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed
4
Internal Revenue Service. Instructions for Form 8615 – Tax for Certain Children Who Have Unearned Income
5
Internal Revenue Service. Instructions for Form 8814 – Parents’ Election To Report Child’s Interest and Dividends
6
Internal Revenue Service. 2025 Instructions for Form 8814
7
Internal Revenue Service. Failure to File Penalty