Pub 929

IRS Publication 929, Pub 929 for short, is an IRS publication that outlines many filing requirements and tax information relating to dependents. This includes who can be claimed as a dependent, how income should be reported, and options for reporting that option on a parent’s return instead. The document also explains how investment income should be reported for children, regardless of whether they are claimed as dependents. 

Publication 929, Tax Rules for Children and Dependents, is a great reference for tax professionals and taxpayers alike. It is a must-read for anyone who wants to learn about tax filing requirements, the IRS’s latest and greatest, and of course, the best ways to save money on taxes. It’s also a good source of information about the most interesting types of tax credits and incentives, such as those available for charitable donations and mortgage interest. Moreover, it provides valuable information on filing and claiming children as dependents.

The most important part of this publication is the worksheets that are included to help you make the right choice. Among the worksheets, there are several that will help you pick out the best options for your unique situation. For example, you will need to decide if you want to claim the kiddie tax on your child’s unearned income, if you are concerned about their safety, or if you simply have too many kids to file a single return.

Tax Rules For Children And Dependents

Pub 929 explains many filing requirements and tax information about dependents. It also discusses who can be claimed as a dependent on another person’s return, how much income a child needs to report, and whether they may be able to report investment income on their own tax returns instead of on the parent’s return. To determine if your dependent needs to file an income tax return, you need to find out how much they earned and unearned income they had during the year. Earned income includes salary or wages, tips, taxable scholarships and fellowship grants, and professional fees. Unearned income includes taxable interest, dividends, capital gains, unemployment compensation, Social Security benefits, and distributions from trusts.

You can use an IRS worksheet to help determine if your dependent has enough income to need to file an income tax return. The worksheet is located in Publication 929 and will help you compare your dependent’s earned income with their unearned income. If your dependent’s unearned income is more than the larger of $1,100 or their earned income (up to $11,850) plus $350, they need to file an income tax return. However, if your child’s unearned income is less than $1050, you can include that on your own return rather than theirs.

The Earned Income Tax Credit is a tax credit that reduces or eliminates your federal income taxes if you are eligible for it. The credit is worth as much as $400 per month, depending on your household’s income. It can help you pay for things like health insurance from the Marketplace, tuition and child care, and certain other expenses. Some people cannot be claimed as dependents, including married couples who file joint returns. You may also not claim a dependent who doesn’t have a Social Security number or isn’t a U.S. citizen, resident alien, or national.

Pub 929 also mentions that the maximum contribution limits for Special Enrollment Period (SEP) and SIMPLE IRAs have been increased to $66,000 for 2023. In addition, the additional catch-up contribution limit for eligible individuals aged 50 and older has been increased to $3,500. In addition to these specific topics, Publication 929 lays out the thresholds for various income tax credits and how these thresholds change based on inflation. For example, the American Opportunity Credit and the Lifetime Learning Credit phase out for certain people if they have too much income.