Child Savings Account Taxes – When and How To Pay?
When are child savings account taxes due and how are these paid? The answer depends on the specific type of savings account and the individual circumstances. A 529 college savings plan has no taxes on any earnings that remain in the account, and any funds withdrawn to cover college expenses are tax free as well. If funds are withdrawn for any other reason then the amount is taxed, and this tax can be paid on the parent or the child’s income tax return for that year. For general child savings account taxes the first $1,900 dollars of interest is not taxable, but any amount over this is taxed at the current rate of the parent of the child.
Both variable and fixed rate savings accounts can earn up to the $1,900 limit, and this includes all accounts that the child may have not just a single account, before any taxes must be paid. If your child has earned more than this then any balance after the non taxable limit has been reached will be taxed. Child savings account taxes can be paid by completing form 8814 for the child and then attaching this form to the current year tax return for the parent. Student savings account interest is also usually subject to the same limitations and non taxable amounts as other types of savings accounts.
If a separate return is filed with the IRS for the child only then you should use form 8615 to report any , child savings account taxes, and you will need to attach this form to the filed for your child. Any tax liability on the interest earned on a savings account for a child is generally the responsibility of the parent. Many top savings accounts offer a decent amount of interest on any account balances, and it is important than any interest above the non taxable limit is reported and the taxes paid. Tax returns are due on April 15 for the previous year’s return.